A Reminder Capital Gains Tax for non residents

18 March 2020

With the various capital gains tax changes coming in from the 6th of April, we thought it would be timely to remind you on the Capital Gains Tax (CGT) position for non residents.

The rules include commercial, as well as residential property and extend the charge to cover all non-resident companies and indirect disposals. Both direct and indirect disposals will need to be reported to HMRC within 30 days of the disposal, and from April 2019, the rules have applied to:

  • Both commercial and residential property (previously residential only)
  • All non-residents (no exceptions for certain non-close companies)
  • Indirect disposals (e.g., sale of shares in a company that owns UK property).

A recap of the main changes is below:

 

Disposal of UK commercial property by non-UK residents

CGT has been extended to apply to disposals of ANY UK property – including commercial property and residential property owned by widely–held non-UK resident companies (e.g., certain funds).

Indirect Disposals – disposal of shares in property rich companies

CGT has been imposed on the sale of shares whose assets substantially consist of UK real estate (either residential or commercial). The rules apply if:

  • The company is property rich – 75% or more of its value derives from UK property.
  • The disposal could be of the company which directly owns the UK property or a parent/holding company of a subsidiary holding UK property. When more than one company is sold, there are additional rules to consider when working out whether the aggregate value exceeds the 75% value of the companies derived from UK property.
  • Non-residents are liable for tax on indirect disposals, unless they have a substantial indirect interest in the underlying land – hold (or have held at some point in the previous 2 years) at least a 25% interest in the company.

Re-basing opportunities

The acquisition cost of assets – affected by both direct and indirect charges, were re-based to the value of the date on which the changes came into force (e.g. April 2019).

There are some additional rules in connection with re-basing that we can discuss as applicable.

Temporary non-residents

If an individual makes a disposal in the overseas part of a split year or in a year when they’re a non-resident, any part of the gain on the disposal that is not chargeable to NRCGT, may be caught by the temporary non-resident provisions and charged in the period of return.

need tax planning advice?

Contact Debbie Ince today for more information.

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