The latest on CGT for non-residents selling UK residential property

At the end of November 2014, HMRC published a response to its consultation and provided details on how the new CGT charge will apply.

Calculating the Tax Payable

The default position will be that gains are calculated with reference to the uplift in value of the property since 5 April 2015, however it will be possible for most taxpayers to elect to time-apportion the gain on a straight line basis, or use the original cost if preferred.

Tax Rates

Individuals will pay CGT on all gains which exceed the annual exemption (£11,100 in 2015/16) at either 18% or 28% depending on the level of other UK taxable income.

Trustees will pay CGT on all gains at 28% and after being given relief to the value of 50% of the annual exemption available to individuals i.e. £5,550 in 2015/16.

Companies within the scope of extended CGT will pay 20% CGT on gains realised on the disposal of UK residential property. It should be noted that the ATED regime applies in priority to extended CGT, gains which are subject to ATED related CGT are taxed at a higher rate of 28%.

Reporting and Tax Payment

It was originally anticipated that tax would be withheld at source when a property was sold, however this will not be the case.

Instead, a payment on account process will be implemented the mechanics of which are not yet finalised -- but it's expected that non-UK resident vendors will have to notify HMRC within 30 days of making a sale and make a payment on account of any tax due within 30 days of completion.

There will be an exemption from this process if the vendor already files a self-assessment tax return, this will be the case for most non-resident landlords. They will report the gain and pay any tax under the current rules for self-assessment.

Non residents who are required to make a payment on account will be deemed to have made a self-assessment return when the payment on account is made. This will effectively allow them a twelve month period to amend the "tax return" and the tax that is due.

Detailed Analysis

We've produced a detailed analysis of these new CGT rules for our Gold and Practitioner members, including an assessment of: