6th April 2015 will see the introduction of new Capital Gains Tax Rule for Non-Resident UK Property Owners.
In November 2014, the UK Treasury and Her Majesty's Revenue and Customs (HMRC) published their response to last year's consultation on the introduction of a capital gains tax (CGT) charge on non-residents who dispose of UK residential property. Draft legislation was published on 10 December 2014 and the new charge is to take effect from 6 April 2015.
The new CGT charge on non-residents will focus on "property used or suitable for use as a dwelling", it will now include residential property used for letting purposes.
All residential properties within the definition are potentially within scope, regardless of their value. This distinguishes the new charge from the existing ATED-related CGT charge, which limits the charge to properties where disposal exceeds a specified "threshold amount". This is currently £2 million and is due to decrease to £1 million from 6 April 2015 for gains accruing after that date.
The Government advises non-resident property owners to record the condition and value of their property as at 5th April 2015. Therefore it would be prudent to commission a professional valuation to make a formal and reasoned record of the value on this date. Going forward, it will carry greater weight in ten or twenty years' time if it is contemporaneous.
The Government's guidance states that the rate of Capital Gains Tax for non-resident property owners will be the same as for nationals: 18% or 28% for individuals, 28% for trusts, and the annual exempt amount will be the same. The tax rate for individuals depends on the amount of taxable UK income the person has. In some cases it may also be possible to claim the private residence exemption for at least part of the gain.
When property is sold in the UK the vendor has to report the disposal on a NRCGT return and pay any Capital Gains Tax due within 30 days of the day after the date the property sale is completed, or if they are already enrolled in the UK's Self-Assessment they pay this as part of the normal end of year tax payment.
Whilst Martin & Wheatley keep abreast of the changes for our clients, we are not tax advisers. If you would like to know more about your liabilities then we strongly suggest you take advice from a qualified source. We have dealt many times with TWP Accounting LLP, and their Private Tax Client Partner, Mike Dawes. Established for over 75 years, TWP are the largest firm of chartered accountants, tax and business advisers in Weybridge, Surrey. www.twpaccounting.co.uk