Tax charges for non-resident owners of UK property

With effect from 6 April 2015, a new capital gains tax charge has been introduced which is aimed at UK non-residents disposing of UK residential property; it specifically applies to non-resident individuals, certain companies and trustees.

The amount of capital gains tax payable on disposal of UK residential property is based on the proportion of the gain arising after 5 April 2015, calculated using time apportionment or "re-basing".

If you are non-UK resident and you own UK residential property, it is prudent to obtain a valuation of your property as close to April 2015 as possible, as this will give you flexibility on a future disposal of the property.

Where a capital gains tax charge applies, the rates of tax are the standard rates applying, i.e.

  • Individuals will pay either 18% or 28% depending on their levels of total income and gains in the year;
  • Companies will pay 20% but will also be subject to annual tax on enveloped dwellings (ATED);
  • Trustees will pay a standard rate of 28%.

For individuals making a disposal, it may be possible to claim principal private residence relief (PPR) providing the requirements of HMRC’s occupancy test can be satisfied. This requires the owner/co-owner to have occupied the property for a minimum of 90 individual nights.

Alternatively, where a disposal is by a company, ATED charges will apply in preference to these charges.


What action should you take?

These rules are particularly complex because they interact with the statutory residence test which was introduced with effect from 6 April 2013.

  • You should check your UK residence position in accordance with the statutory residence test;
  • If you are non-UK resident but your spouse is UK resident, you may not be affected by the new CGT rules but should seek professional advice to clarify your position;
  • If you dispose of UK property at a time when you are non-UK resident, you must notify HMRC of the disposal within 30 days of completion. All property disposals must be notified to HMRC irrespective of whether or not a tax liability arises;
  • If you do not file a self assessment on an annual basis, you should pay the tax due within 30 days of completion;
  • If you submit annual self assessments the tax can be paid on your normal due date provided this is approved in advance by HMRC.

Note that any losses made on disposal can be offset against gains made on the disposal of other properties. If you subsequently become resident in the UK, ring-fenced losses from an earlier period of non-UK residence will be available to offset as general losses against other chargeable gains.

Rebasing (whereby the tax payable is based on gains for the period after 6th April 2015) is not available to individuals who purchase UK property whilst they are non-UK resident and subsequently sell the property once they become resident in the UK.

If you are considering a UK property disposal at a time when you are non-UK resident, or you are considering returning to the UK and will wish to dispose of UK property, we recommend you take advice as the correct timing can reduce your liabilities.

If you would like to discuss any aspect of property tax, please get in touch with us using our contact page.


Source: (Lesley Stalker, RJP Accountants & Tax Advisors)