Capital Gains Tax (CGT) for non residents
Date:
10 December 2014
Prior to the 2014 Autumn Statement, at the end of November, the Government published the final version of its plans to implement CGT charges on non residents. In the report, the Government confirmed that the rate for non resident individuals will be the same as the rate for UK resident individuals: 18% or 28% depending on an individual's total UK income and chargeable gains for the tax year. Non resident individuals will also have access to the CGT annual exemption, as with UK residents (£11,100 for 2015/16).
The Government has confirmed that all valuations will be rebased to April 2015. The tax will therefore be limited to gains that have accrued after that date. Alternatively, it appears that it will be possible to choose to either apportion the gain over the whole period of ownership or elect to have the gain calculated with no reference to the rebasing.
Non resident partnerships, trusts and non resident companies which are set up as private individual or family investment vehicles will also be brought into the CGT regime.
Under the current rules, individuals are entitled to CGT relief in the form of principal private residence relief (PPR) on their only or main residence. If there is more than one residence, it's possible to elect which is their main residence and qualify for relief for that period. Where PPR has been available for some of the period of ownership, the last 18 months of ownership will automatically qualify for relief. As the disposal of foreign property is also subject to UK CGT for UK residents (subject to any double taxation relief which may be available), it may be that the foreign residence qualifies for PPR depending on the circumstances.
The Government has decided to restrict the circumstances when an overseas residence can benefit from PPR. These changes apply in relation to both a UK resident disposing of foreign property and a non UK resident disposing of UK property. Going forward therefore, the UK Government will not accept that a UK property can be a non resident's main residence for UK CGT unless they have resided in the property for at least 90 midnights that year. The same rule will apply in relation to UK resident owners of homes abroad.
It is useful to have some more clarity on how the CGT charge will apply in practice for non residents. For any of our non resident clients who wish to discuss how this is likely to apply to their own situation, please get in touch with us on the details below.
