HM Revenue and Customs have issued a consultation document introducing the capital gains tax charge on non residents owning residential property in the UK which was proposed in the Autumn Statement.
Currently non-residents are not subject to capital gains tax. From April 2015 a new charge will apply to non-residents on gains arising on UK residential property after that date.
Tax will be charged at the same capital gains tax rates as for UK individuals of 18% or 28% depending on their level of income. Principal private residence relief will be available in limited circumstances, but as part of the proposals HMRC are considering removing the option to make a main residence election, not just for non-residents, but for all individuals.
The charge will apply to capital gains regardless of whether the property is rented out. This is different from the current Annual Tax on Enveloped Dwellings (ATED) charge which applies mainly to companies who own UK residential property, where relief from the charge is available for let properties.
The charge will not apply to UK residential properties held through a UK REIT or other collective investments scheme. This will be subject to a genuine diversity of ownership test to avoid small groups buying property jointly to avoid the charge.
To ensure compliance it is proposed that solicitors, accountants or other agents dealing with relevant sales will be required to withhold tax from the sales proceeds.
This is a major change for all non-residents owning UK residential property. Everyone falling into this category should be reviewing their tax position in advance of next April.
The information in this article was correct at the date it was first published.
However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.
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