Capital gains tax (CGT)
Non-resident CGT
Prior to 6 April 2015, if a UK property
was directly owned, non-UK resident
individuals and non-UK resident trustees
were in most cases outside the scope
of CGT. Equally, where a UK resident
individual, including a trust beneficiary
in appropriate circumstances, occupied
UK property as their principal residence
worldwide and certain statutory conditions were met, no CGT was payable
on a disposal of that property due to
Principal Private Residence relief (PPR).
Where the gain was taxable and not
covered by PPR, the rate of tax was 18%
for basic rate taxpayers and 28% in all
other cases, subject to an annual taxfree allowance, where applicable.
Following a lengthy period of consultation, a CGT charge ('non-resident
CGT') has been introduced for non-UK
residents (including individuals,
trustees and partnerships, as well as
certain types of funds and closely held
companies) disposing of UK residential
property on or after 6 April 2015.
The charge only applies to gains accrued
since 6 April 2015 unless an election is
made to substitute an earlier acquisition
cost. For individuals, the rates are the
same as those set out above, the rate for
trustees is the higher rate of 28% and
the rate for companies is 20%.
As a result of the introduction of nonresident CGT, the PPR rules have been
changed. PPR may be available for a
tax year where the person making the
disposal, or their spouse or civil partner,
either:
is tax resident in the country in which
the property is situate for that tax
year; or
spends at least 90 days in that tax
year in the property, or one or more
other properties located in the same
jurisdiction as the relevant property,
in which one or both of them has an
interest, the 'day count test'.
UK residents seeking to claim PPR for
a UK residential property will satisfy
the first condition. Non-UK residents
disposing of a UK property may be able
to qualify under the second condition.
They may then claim PPR for that and
any other tax years for which they also
qualify before the disposal
Companies disposing of residential
property do not qualify for PPR.
ATED-related CGT
In addition to non-resident CGT, there
is another CGT charge to which companies and other non-natural persons may
be liable on a disposal of higher value
UK residential property. This is ATEDrelated CGT.
If a UK residential property is within
the ATED charge, because it has a value
exceeding £1 million (£500,000 from
next April) and is owned through a
company (or other non-natural person),
on a disposal of the underlying property, the company that owns it will also
be potentially liable to ATED-related CGT
at the rate of 28% on any ATED-related
chargeable gains (those arising since
acquisition or 6 April 2013, whichever is
later, subject to an election to substitute
an earlier acquisition cost).
As the ATED-related CGT charge only
applies to ATED-related gains, where a
property is not liable to the ATED for a
period of time, for example if it is rented
out to a third party, it will be liable to
non-resident CGT on post 5 April 2015
gains instead. Where a company could
be liable to both ATED-related and
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