Capital Gains Tax Rules for Non Residents selling UK Residential Property

Prior to April 2015, individuals who were resident outside of the U.K were not subject to Capital Gains Tax on the sale of UK assets. A change to this legislation took effect on 6th April 2015 specific to sales of residential property.  The result of the change means that any sale of UK residential property by a non resident could be subject to capital gains tax in the UK.

Reporting Requirements

The sale must be reported to HM Revenue and Customs within 30 days of the conveyance.  There is an online process to follow.  This reporting requirement applies whether the tax is payable or not.

Tax Charge

Tax is calculated on the amount of the gain which accrued post 6th April 2015.  This is likely to mean that there will be few due to pay tax in the first year of the new regime but the number will steadily increase over time.  There are three ways in which the accrued gain can be calculated.

Default Method

The property must be valued at 6th April 2015 and the chargeable gain calculated on the difference between that figure and the proceeds available.

Straight Line Apportionment

The chargeable proportion of the gain is calculated on a daily basis with only the post 6th April 2015 proportion being taxable.  No valuation is required for this method, but an election must be completed.

Retrospective Basis

The entire gain/loss is chargeable, not just the post 6th April proportion. Again, an election is required and this method will be most beneficial where the disposal results in a loss as the entire loss would then be available to offset against other gains. Although because other gains would only crystallize when an individual resumed UK residence and so in reality, the use of the loss might be limited.

Capital Gains Tax Payable

If the seller is registered for Self Assessment, they can opt to pay the CGT due at the usual payment date on or before 31st January following the end of the tax year in which the gain arose.  So for the 2019/20 tax year, the payment date would be on or before 31st January 2021.  The reporting of the gain must still be done within 30 days though.  If the seller is not registered to pay tax in the UK, the CGT must be settled within 30 days of the conveyance date also.  The payment can only be made once the sale has been notified to HMRC and they have issued a reference to which the payment should be allocated.

You can read more about CGT on the HMRC website here.

HMRC Penalties

Penalties will be charged if either the reporting of the gain or payment of tax is late.

Summary

The new rules came into force on 6th April 2015 and apply to individuals, partners in partnership, trustees and personal representatives of a deceased non resident individual.

All sales of property must be reported to HMRC within 30 days of conveyance. Chargeable gains will be calculated to the extent they accrue post 6th April 2015. Tax may be payable within 30 days of the date of conveyance.  Penalties will be charged on both late reporting and late payment of tax.  An election for the basis of calculation of the gain or a valuation as at April 2015 may be required and so in order to report within the very limited timescales, the gain position must be considered as early as possible during the sale process.