The Government has published its expected consultation document (announced in the Autumn Statement) on the extension of Capital Gains Tax (‘CGT’) to non-residents selling UK residential property, so as to bring their tax treatment in line with that of UK residents.
The charge, which relates only to gains arising from April 2015, will apply to non-UK residents disposing of UK property used, or suitable for use, as a dwelling. Unlike the current rules for ‘enveloped property’ (e.g. owned by a company), it is proposed that gains made on the disposal of residential property used as an investment are also subject to CGT.
The rate of tax charged will mirror the higher and lower rates of tax for UK residents, e.g. 18% or 28% on gains made, depending on the non-resident’s total UK income and gains. The annual exemption is likely to be available to non-resident individuals, as will ‘main’ residence relief, although the latter will only apply in limited circumstances.
It is proposed that different forms of non-resident entities will be subject to CGT, including trustees and partnerships, but the government is yet to confirm the applicable rates of tax.
A new delivery mechanism is suggested for the reporting and payment of CGT by non-residents, with a form of withholding tax operating alongside an option to self-report the tax due.
If you would like more detailed advice on the implications of the extension of CGT to non-residents, please contact the partner at Hunters having responsibility for your legal matters, or (for new enquiries) please contact a member of our Private Client team.