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October 15th 2021

Property CGT for non-residents

Christiaan summarises the CGT rules for non-resident taxpayers who dispose of property situated in the UK.

Generally speaking, non-resident individuals are not subject to UK Capital Gains Tax (CGT) on the disposal of UK or foreign assets. There are, however, some exceptions which are listed below:

Residential property or land

Gains from UK residential property or land that have arisen from 5 April 2015 are subject to non-resident CGT at rates of 18% or 28%.

There are three methods of calculating the chargeable gain:

  • The default method
  • Straight-line apportionment method
  • The original cost method

It will be beneficial to calculate the CGT using each of the methods to establish the lowest tax liability. Please see the example below:

John who is UK non-resident purchased a residential property for £100,000 in April 2000, the property was valued at £150,000 in April 2015 and he sold the property for £250,000 in April 2021.

The default method

Under this method only the pre-April 2015 portion of any gain remains tax exempt which means that the proportion of the gain arising after 6 April 2015 is taxable.

The CGT payable for John would be based on the chargeable gain of £100,000 (£250,000 less the £150,000 April 2015 valuation).

The straight-line apportionment method

Under this method the chargeable gain is calculated as normal, however only the proportion of the gain which covers the period of ownership from April 2015 to the date of sale will be chargeable.

John owned the property for a total of 21 years. Only the ownership period from April 2015 to April 2021 will be subject to capital gains tax which is 6 years. His chargeable gain will be £150,000 (£250,000 less £100,000 purchase price) x 6/21 years which equals £42,857.

Original cost method

Under this method John will ignore the April 2015 valuation. John’s chargeable gain would be £150,000 (£250,000 less £100,000 purchase price).

John would choose to use the straight-line method as this produces the lowest chargeable gain.

Non-residential property or land

Gains from UK non-residential property or land that have arisen from 5 April 2019 are subject to non-resident CGT at rates of 10% or 20%.

There are two methods of calculating the chargeable gain:

  • The default method
  • The original cost method

Let's look at another example. Sarah, who is UK non-resident, purchased a commercial property for £500,000 in April 2010, the property was valued at £800,000 in April 2019 and she sold the property for £1000,000 in April 2021.

The default method

Under this method only the pre-April 2019 portion of any gain remains tax exempt which means that only the proportion of the gain from 6 April 2019 is taxable.

The CGT payable for Sarah would be based on the chargeable gain of £200,000 (£1000,000 less the £8000,000 April 2019 valuation).

Original cost method

Under this method Sarah will ignore the April 2019 valuation. Sarah’s chargeable gain would be £500,000 (£1000,000 less £500,000 purchase price).

Sarah would choose to use the default method as this produces the lowest chargeable gain.

Reporting requirements

From April 2019 non-resident individuals who sell any type of UK property or land have been required to report their disposal to HMRC within 30 days of completion.

They were also required to make a payment on account of non-resident capital gains tax within 30 days. The sale must be reported even if at a loss.

Transfers between spouses are not required to be reported.

At the Autumn Budget 2021 it was announced that the reporting and payment deadlines have been extended to 60 days with effect from 27 October 2021.

Contact us for assistance with any of the matters discussed in this article.

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