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Reporting gains made by non-UK residents

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With effect from 6 April 2015, non-UK residents selling UK residential property will be subject to UK capital gains tax (CGT). With only 30 days from exchange to report the gain and pay any tax due, affected sellers need to be aware of these rules in advance and make sure they act promptly after completion.

Who is affected?

The new rules will apply to any of the following if they are disposing of UK residential property:

  • non-UK resident individuals (or their personal representatives);
  • non-UK resident partners in a partnership;
  • non-UK resident trustees; and
  • non-UK resident companies or funds.

What types of property are affected?

As well as residential property (including the seller’s home) situated in the UK, the charge will also affect:

  • residential property under construction;
  • property being converted to residential use;
  • rights to acquire residential property (i.e. purchasing ‘off-plan’);
  • property that is in mixed residential and non-residential use; and
  • property that has been in residential use after 5 April 2015.

It will not apply to certain types of accommodation such as nursing homes, purpose built student housing, prisons and hospitals. Nor will it apply to bare land if construction has not commenced.

How much is taxable?

The charge only applies to gains arising after 5 April 2015.  This can be calculated either:

  • by rebasing the property as at 5 April 2015 (known as the standard method) – non-resident property owners should therefore consider seeking a current valuation to use in the event of future sale;
  • by time apportioning the gain across the period of ownership – this will be useful for properties where the gain arises largely in the later stages of property ownership; and
  • across the whole period of ownership – this will be useful where the property is standing at a loss.

In terms of the rates to be applied, individuals will be liable for CGT at 18% or 28% (depending on the sellers other UK taxable income).  Trustees will pay CGT at 28% and companies will pay at 20%. 

However, if the seller (usually a company) is already within the scope of the ATED related CGT charge, the ATED rules take preference.   These rules impose a minimum tax rate of 28% and can apply to gains arising from 5 April 2013 (depending on the value of the property).

What do sellers need to do?

  • Seller must make a report of the disposal to HMRC regardless of whether any tax is actually due.  The report must be made online and the form is available here.
  • Once a report has been submitted HMRC will email a payment reference and payment instructions to the seller.
  • Payment is also due within 30 days unless the seller is registered for self-assessment.  In this case, the seller can opt (using the online form) to pay the tax on the usual payment date (31 January following the end of the tax year).

Need some help…?

Given the length and complexity of the form as well as the need to submit detailed calculations, it is no surprise that some sellers will be daunted by the prospect of making the return.  Thankfully, HMRC allows sellers to authorise an agent to complete the return on their behalf and deal with any queries from the governing body. Our specialist advisors at BHP can provide sellers with the necessary assistance to evaluate the different calculation options and then prepare and submit the return on the seller’s behalf.

If you would like to know more about the changes being introduced or require any assistance, please get in touch.