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Capital Gains Tax (CGT) for Non-Residents

April 2015 not only brings about tax rate changes and new thresholds, it brings the introduction of Capital Gains Tax (CGT) for Non-Residents disposing of UK property, an area that has until now been exempt from UK tax.House Sale

Does that mean the whole gain from the date of purchase is now taxable upon sale? 

No, that would be harsh and frankly too simple a thing for HMRC to impose! There’s four key points in the legislation to consider:

  1. The change came into effect from 5 April 2015 and it’s the gains from that point that will be assessed for tax;
  2. The gain is calculated either from the valuation as at 5 April or time apportioned on a pro-rata basis;
  3. Any period of occupation as a private residence (use as your only or main home) will attract relief although there are restrictions;
  4. Notification of the disposal differs from the requirements of UK residents making similar disposals.

How should I calculate my gain?

Well, that depends.  If you sell the property shortly after the change it may be that there has been no gain since 5 April and thus using the value at that date as the base cost could be most beneficial.

However, should there be a large increase in value between 5 April 2015 and your disposal date a time apportioned gain may be more appropriate.  This would involve the total gain on disposal, from the original acquisition cost, being apportioned equally across the period of ownership.

Ultimately, which option you take should be decided by your individual circumstances and the timing and level of capital gains involved.

What should I do and when?

The most important thing to do right now is to keep your options open.  To do that, you should get a good idea of value at 5 April which could be used in any future CGT calculation and be used to defend against any potential challenge from HMRC.  Consider a formal valuation by a professional valuer or obtain an estimate from an estate agent now.

If you leave the valuation to a later date then the least you should do is record the condition of your properties now and where possible support that with photos, it will help get a more accurate valuation in the future.  Upon disposal of any properties a Non-Resident Capital Gains Tax Return must be filed with HMRC within 30 days of completion.

If you’re not already within the UK Self Assessment system then tax due would also be payable at that 30 day deadline.

It’s important to limit your tax exposure by getting the gain calculation right and using the method that best fits your circumstances.  If you need assistance we’re here to help so get in touch.

CNM Advisory