Non UK resident returning to the UK and capital gains tax

Question:

I left the UK to go to Australia in 2004. I was living as a permanent resident in Australia and I later transferred my UK financial investments to Australia as well. I was told at the time of transfer that I wouldn't be subject to UK capital gains tax on the transfer provided didn't return to the UK for at least 5 years.

It's possible that I may come back to live in the UK in the next 12 months or so and am looking into the tax consequences of this (both in the UK and Australia.

My question for you is: What will happen in UK tax terms if I leave all my financial investments in Australia and just return back to the UK. Does this mean that even if I return within 5 years I won't be taxed on my earlier capital gains or is it my physical presence in the UK that would lead to the tax charge?

Answer:

You are correct that as you left the UK after March 1998, you would need to remain non UK resident for a period of at least five complete tax years in order for any gains arising during your period of non residence to be exempt from UK capital gains tax ('CGT'). Whether the actual investments are left overseas or remitted to the UK is irrelevant for this purpose and it will be your residence status that will determine any tax charges on your return.

Note that it would not be the value of the investments that would be taxed, but rather it would be the capital gain that arose in 2004 that would be taxed.

You should therefore try and avoid UK residence until the five year period has been satisfied.

About the Author

He worked in Ernst & Youngs Entrepreneurial Services department for a number of years before setting up his own tax planning practice. He is now a full time tax author.

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