When a non-resident individual is contemplating selling his UK residential and / or commercial property and going abroad for good with no plans to return to the UK , careful consideration has to be given as to how this will impact on the provisions of Capital Gains Tax and in particular those set out in the Finance Act 2019.
This Act sets out the changes to the capital gains tax rules that apply to both UK residents and non-residents. However, there are some notable differences in how the new rules apply to those non-residents and as such both the rule changes from April 2019 and April 2020 will apply.
The rule changes applying from April 2020 in contrast to non-Residents above apply to UK residents, the changes centre around the filing date and the payment date.
Between 2015 and 2019 a non-resident individual was subject to tax in the UK in respect of gains arising from a disposal of residential property. From 6 April 2019, the scope to tax has been extended to cover both residential and commercial property and therefore the disposal of both types of properties will now be subject to capital gains tax. The scope has further been widened to include the direct disposal of UK land and the indirect disposal such as through a UK property rich company.
New requirements of a filing date of 30 days was introduced for non-residents with some exceptions i.e. for those caught within the Annual Tax on Enveloped Dwellings (ATED) and from April 2020 this exception has been removed for everyone else and all relevant disposals by non-residents, other than companies, will have to be reported within 30 days.
In contrast, whilst UK residents do not have the filing obligation if no gain arises and certain conditions are met (e.g. perhaps where they are claiming the main residence exemption), this is not the case for non-residents as they must file a return even if no tax liability arises. There is a requirement to file a separate return for each disposal unless they happen on the same day.
The payment obligation, set out in Schedule 2 of FA 2019, states that payment of CGT will now be due by 30 days from completion for disposals from April 2020 regardless of whether the individual is within self-assessment or not. For disposals, after April 2019 and before April 2020 it is possible for a non-resident’s payment obligation to be aligned with the self-assessment deadline of 31 January. This will be a noteworthy change and worth considering as it may influence the date of disposal.
Paragraph 6, FA 2019 onwards sets out the obligation to make a payment on account of capital gains tax. The payment is due on the filing date of the 30-day return as referred to above. This might result in taxpayers paying CGT before a tax year has ended and having to estimate their liability based on their best guess of the tax band that the gain will fall.
This whole process is further complicated by rules regarding the offset of losses against the gains, the rules regarding companies are different.
The information contained in this article is for general information purposes only and does not constitute advice, Whilst we endeavour to keep the information up-to-date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability for a particular purpose. We recommend that professional advise should be taken from a suitably qualified expert before undertaking any action.