Budget 2015: Non-residents CGT charge – new guidance published

As part of the Budget HMRC has published new guidance on how the non-residents CGT charge – effective from 6 April 2015 – will work. The charge applies to the disposal of UK residential properties by non-residents. The guidance is set out as frequently asked questions and confirms earlier announcements. In particular:

– The charge applies to non-resident individuals, certain companies and trustees.
– The applicable rates of tax are:

Rate
Individuals 18%/28%
Companies 20%
Trustees 28%
  • Only the proportion of the gain relating to the period after 5 April 2015 is chargeable. This will be calculated by establishing the value at 5 April 2015 (also known as ‘rebasing’) or using time apportionment.
  • Where a disposal is made by a company the amount of gain subject to the ‘ATED related CGT charge’ is not also subject to the non-residents CGT charge.
  • Where a disposal is made by an individual they may claim principal private residence relief if they meet the ‘occupancy test’. The test is met if the individual or their spouse stays in the property for at least 90 nights (but with no night counting twice).
  • The disposal must be notified to HMRC within 30 days of completion.
  • If the individual is part of the self-assessment system they may pay the tax due as part of their normal end of year tax payment. If the individual is not within the self-assessment system they will need to pay the tax due within 30 days of completion.
  • Losses on disposal are ring-fenced for use against gains on such property that arise to the same non-resident.

The guidance offers practical advice on how these rules are applied.

In particular the following has been clarified:

  • The new occupancy test does not apply in any year where the individual’s spouse is resident in the UK.
  • Rebasing is not available to individuals who purchase UK property while they are non-UK resident and subsequently sell the property once they become resident in the UK.
  • Disposals must be notified to HMRC irrespective of whether there is a tax liability.
  • Where an individual becomes resident in the UK, ring-fenced losses from the earlier period of non-residence will be available to use as general losses against other chargeable gains.

Like all budget announcements there are winners and losers. The ‘winners’ are those non-residents lucky enough to have a UK resident spouse. Those individuals will not need to meet the ‘occupancy test’ and may be largely unaffected by the new CGT charge.

Perhaps the ‘losers’ are those who do not seek timely tax advice. For example, those coming to the UK may be fully taxable on gains accruing during their period of non-residence if they are resident in the UK during the year of disposal. They will not qualify for rebasing. In contrast, had they disposed of the property before they became resident in the UK they would have qualified for rebasing and may have eliminated a significant portion of the taxable gain.

The rules are complicated and professional advice should be sought in all cases.