At the end of November 2014, the government published a report on its consultation on the extension of capital gains tax (CGT) to non-UK residents. The policy was originally announced in the Chancellor’s 2013 Autumn Statement. The new rules are intended to take effect from 6th April 2015.

To date, the general rule has been that only UK resident persons are subject to CGT. For some time, there have been anti-avoidance rules to prevent individuals becoming non-resident for short periods of time in order to escape the charge.  In 2013, as part of a new regime taxing high value residential property held by ‘non-natural persons’ (broadly, companies) the charge was extended to certain non-UK resident entities.

The latest development, however, extending tax to non-UK resident persons holding residential property in the UK, represents a fundamental shift in the basis of charging CGT.

The report gives some further detail on how the charge will apply:

• Gains accrued up to 6th April 2015 will be sheltered from the charge, so that CGT will only be charged on increases in value from that date.  This will be achieved by either an effective rebasing to 5th April 2015 or a time apportionment of the whole gain.
• CGT will be charged at the usual rates for individuals (18% or 28% depending on the person’s total UK income and chargeable gains) and trustees (28%).  A rate of 20% will apply to companies (in line with the corporation tax rate).
• The annual exemption will apply as normal to non-resident individual and trustee owners.
• Non-resident individual and trustee owners may also be eligible to claim principal private residence (PPR) relief, subject to satisfying the usual criteria, namely, that the property being disposed of has been the only or main residence of the owner (or the beneficiary of the trust holding the property) throughout the period for which the relief is claimed.  In addition, the government has introduced a ’90 day rule’ for non-residents (and UK residents owning overseas properties), under which the owner (or beneficiary of the trust) must have spent at least 90 midnights in the property in each tax year for which the relief is being claimed.
• The charge will not apply to institutional investors and funds, thanks to a ‘genuine diversity of ownership’ test.

For more information or advice in relation to the extension of CGT, please contact the partner at Hunters having responsibility for your legal matters, or for new enquiries, a member of the Private Client team.