UK and International Tax news

CGT And Non Residents Consultation

Wednesday 2nd April 2014

HMRC has recently issued a consultation document in connection with its proposals announced in the 2013 Autumn Statement to charge capital gains tax (CGT) on gains made by non residents disposing of UK residential property, from April 2015.  The charge will come into effect in April 2015 and apply only to gains arising from that date.

Unlike other countries that charge tax on gains relating to disposals of residential property located within their jurisdiction, the UK does not generally charge CGT on disposals by non residents. This means that any gain made by a non resident individual on UK residential property is either taxed in the individual’s country of residence, or not taxed at all.  UK resident individuals however are subject to CGT on disposals of any residential property other than their primary residence, including on the gains made on any residential property they own abroad.

The taxation of gains made on residential property that is owned in other ways by UK persons through trusts, companies and funds is either subject to UK CGT, or UK corporation tax, depending on the nature of the investment and the structure involved.

The government believes that this situation is unfair and has decided to rectify it so that, going forward, non residents making gains on UK residential property will be subject to UK CGT in a comparable way to UK residents, although the government does recognise that non residents hold UK property through various structures and for various purposes.

Charging non residents on the gains that they make on UK residential property is a significant change for the UK CGT regime and therefore the government is now consulting on how best to introduce this over the course of this year.

The consultation sets out the government’s proposed approach to introducing the charge on non residents disposing of UK residential property and seeks views on the proposed design and the likely impact by 20 June 2014.

Following this consultation, the government will confirm the scope and structure of the new regime and may hold a further consultation on some more detailed and technical aspects of the design of the CGT charge.

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