All Change - The charge to capital gains tax on non-UK residents disposing of UK residential property takes effect from 6th April 2015


CGT is to be extended to all non-UK residents disposing of UK residential property, but only in relation to gains post-6th April 2015.  Together with this, the rules on Principal Private Residence (PPR) relief are also being amended in such a way that both UK residents and non-UK residents will be affected.  The following is an overview of the proposed changes.


Historically disposals of residential property by non-resident individuals have not been subject to CGT.  Since April 2013, non-resident companies have been subject to CGT under the Annual Tax on Enveloped Dwellings (ATED) regime introduced to cover properties over a certain value.  The government has now extended CGT to all non-residents, whether an individual, company or other entity, disposing of UK residential property, regardless of its value.  The motive behind the legislation is to make the CGT rules fairer, so that the taxation of residents and non-residents is comparable

What property will be caught?

The charge will apply to disposals of UK residential property.  This is defined as “property used or suitable for use as a dwelling”.  Property that is rented out is included, but communal residential property is generally excluded from the charge.

Who will be liable?

The charge will apply to all non-resident persons, whether they are individuals, companies, trustees or executors.  In order not to discourage large-scale institutional investors, there are exemptions for diversely held institutional investors which are not a “narrowly controlled company” and meet a “genuine diversity of ownership” test.

How is the gain calculated?

The extended CGT charge will not apply to the amount of gains relating to periods pre-April 2015.  The government will allow either rebasing to 5 April 2015 or a time apportionment of the whole gain. 

PPR relief

Currently individuals who occupy a property as their main residence can use PPR to exempt the gains arising on that residence from CGT.  Where individuals occupy more than one property as their residence, they can elect which is to be treated as their main residence, and so qualify for PPR.  To avoid non-residents simply electing for their UK property to be treated as their main residence, the government proposes to restrict the relief.

PPR will also be available on the above terms for trusts where the beneficiary living in the property is non-UK resident.

Rates of charge

For individuals the rate of tax will be the same as the CGT rates for UK individuals, currently 18% or 28% depending on the person’s total UK income and chargeable gains.  Non-resident individuals will have access to the annual exempt amount of taxable gains, in line with UK residents.

Reporting the gain

It is proposed that where a person has an existing relationship with HMRC, they will be able to make a payment as part of their self-assessment tax return.  Otherwise a report together with the requisite payment to HMRC must be made within 30 days of the date of completion.

Co-written by Andrew Godfrey, Partner and Christopher Salomons, Associate at Russell Cooke LLP, 2 Putney Hill, Putney, London  SW15 6AB


April 2015

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