With effect from 6 April 2015, the UK capital gains tax (CGT) regime was extended to bring into charge non-residents disposing of UK residential property. Before this date, CGT did not apply to non-residents, other than those carrying on a trade in the UK, and since 6 April 2013, companies subject to the annual tax on enveloped dwellings (ATED) charge.
The charge applies to non-resident individuals who hold property directly or through a partnership, non-UK resident trusts and certain companies.
Where a property was acquired before 6 April 2015, it is only the gain accruing from that date which is charged to tax. The charge is normally the excess over market value at 5 April 2015 although it is possible to elect for an alternative method.
HMRC must be notified of any chargeable disposal within 30 days of the conveyance of the property (not the date of the exchange). The disposal is notified by means of an online form, found on HMRC’s website, and failure to notify HMRC within the required timeframe will attract a fixed penalty of £100 and the potential for further penalties, including daily penalties and tax geared penalties.
Payment of any CGT calculated is due at the same time as filing the CGT return unless the individual is already in the self-assessment regime, in which case CGT is payable by 31 January following the tax year in which the disposal is made (although note that a CGT return is still required within 30 days of completion).
Certain high-value residential properties owned by companies may already be subject to UK tax under the ATED regime. The threshold property value for ATED purposes is currently £500,000. Should a disposal fall within both the ATED and non-resident CGT regimes, the former takes precedence (although a non-resident CGT return will still be required).
It is important that non-residents are aware of their UK tax filing requirements when disposing of UK residential property. Differences of opinion have arisen between the accounting and legal professions as to who should be notifying an individual of their responsibility to notify HMRC within 30 days of completion. Ultimately, however, the responsibility rests with the individual to ensure that returns are submitted, and associated tax paid, on time.
If you have a query about non-resident CGT, contact our specialist Property Group today at firstname.lastname@example.org.