The Government has released their response on the
Consultative Document on implementing a capital gains tax charge on non
residents, who were previously exempt from UK capital gains tax unless they
were considered to be "temporarily non resident". As expected, the legislation will be
introduced with effect from 6 April 2015 and non-residents will then potentially
be subject to capital gains tax on the disposal of UK residential property.
Principal private residence (PPR) relief will continue to be
available but some fundamental changes to this relief will be introduced in the
legislation. Hitherto it was possible, if
the taxpayer owned two properties, to elect to treat a particular property as
the main residence but the Government is now proposing that it will only be
possible make a PPR election if the property in question is situated in the
same country where the taxpayer is tax resident. Alternatively, the election would be valid
provided the taxpayer spent at least 90 nights in the property in the year in
question. Any election will now be made
at the time of the disposal.
There is some concern that, for expatriates working full
time overseas, who typically let out their UK homes when on assignment, it will
be difficult, or even impossible, to fulfil this 90 nights condition and we
must await the actual legislation to see whether the former reliefs relating to
periods worked full time overseas will continue to be available.
The rate of tax for individuals will be 18% or 28%,
depending on the amount of the gain and the available basic rate tax band; the
annual capital gains tax exemption, currently £11,000, will be available to
non-residents.
The new capital gains tax charge will apply from 6 April
2015 so any gain accruing from this date will be caught under this new
legislation but the taxpayer can choose whether to compute the gain by
reference to the fair market value of the property at April 2015 (known as
re-basing; this is likely to be the preferred option) or time apportion the
gain over the period of ownership of the property.
There will be a deadline for reporting the disposal - a mere
30 days from completion of the transaction- which will apply to all taxpayers. However, those taxpayers who already file UK
tax returns and have a current Self-Assessment account will be able to declare
the gain on the tax return for the year in question and pay the capital gains
tax by the normal due date of 31 January following the end of the year of
assessment. Those taxpayers not in the
Self Assessment system will be required to pay the tax at the time the gain is
reported, ie. within the 30 day deadline.
The Government has not yet outlined the methods for reporting or paying
the tax so we must await the legislation in the Spring for clarification on
these points.