Being a non-UK resident can offer certain tax advantages however new regulation around capital gains tax proposed to take effect next year, may have implications for non-residents when they dispose of a residential property as Kirstie Carr of Mogers Drewett explains.
Capital gains tax (CGT) is a tax which applies to the monetary gain made when an asset is either sold or gifted and has increased in value. Only the gain is subject to CGT and certain assets are exempt from this tax such as an individual’s main or only home.
Currently, individuals who are non-UK resident are not subject to CGT when they dispose of a UK residential property. From April 2015, the Government proposes to change this law to bring the taxation liability in line with the way UK residents are taxed. This does however, mean non-UK residents will be able to use the annual exemption amount of £11,000, and may also be able to apply certain reliefs if the property was used for business purposes. UK residents are exempt from CGT on the disposal of their main home. When the new provisions are introduced it is proposed that any individual, UK resident or otherwise, would need to demonstrate which property they have been occupying during the year in which the disposal occurred, to prevent non-UK residents simply electing a UK property as their main home prior to disposal to take advantage of this exemption.
When the new regulation takes effect any property that may be subject to CGT will need to be valued at that date, as this will be classed as the acquisition value for the purpose of ascertaining any gain on the disposal of the property. A non-UK resident may also find that they are subject to CGT not just in the UK but also in the country in which they are resident. Non-UK residents should check to see if there is a double taxation agreement in place between the UK and the country of residence which may give credit for CGT paid in the UK. Finally, on disposal of a property non-UK residents would be required to report the gain on a self-assessment tax return and to pay the CGT due.
For more advice on taxation matters please contact Kirstie Carr.