CGT for non-residents

By Clare Munro, Tax Partner

The long-awaited response to the consultation on capital gains tax for non residents was published last week.  We are still digesting the result and hope to have more to say when draft legislation is published shortly.  However the key points to be aware of at this stage are:

1. Residential property only
The new CGT will be levied only on residential property owned by non-UK residents. Non residents with commercial property or other assets will be unaffected.
Unlike ATED or the higher SDLT charge, let property is included too.

2. Non-residents affected
The new charge affects individuals, personal representatives, trustees and, to the extent not already brought into the CGT charge in 2013, companies, although there is an exemption for large-scale institutional investors.

3. CGT or corporate tax rates
The rate broadly follows the equivalent for UK residents so companies will be taxed at 20%, individuals and trustees at 28%.

4. Main residence relief
There remains the possibility of using main residence relief to shelter the gain.
Non residents, like UK residents, will have the ability to elect to treat their UK residence as their main residence. However, a new restriction on the relief is to be introduced - the election will only be available to those who are resident in the country where the property is located or spend 90 midnights there. For UK properties this could affect the non-resident’s tax residence status and so will need some careful planning.

5. Rebasing
The new charge comes in with effect from 6 April 2015 - a choice of methods will be available to calculate the gain - either rebasing to the April 2015 value or time apportioning the gain.

To discuss any of these issues, please call (020 7490 7766) or email me.

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