Non UK Resident selling properties in UK and capital gain tax issues.
In the 2017 Autumn Budget, Chancellor Philip Hammond makes it mandatory for non-resident investors in the UK to pay all types of taxes of UK real estate on disposal of immovable UK property or land from 6 April, 2019. It applies to:
- both commercial and residential property.
- indirect disposals and to all non-residents.
Capital Gain Tax(CGT) will apply at 10% or 20% depending on whether individual is a basic or higher rate tax payer. For companies its 19% which going to be reduced to 17% from April 2020. Commercial properties valuations are rebased to 5 April 2019 with the goal of charging gain arising only after 6 April 2019.
Indirect disposals are also an area of concern which means disposal of shares in a company or holding company that owns UK real state, an interest in a partnership or an interest in settled property which derives its value from UK land. It also includes disposals of interest in UK funds e.g. REITs, PAIFs accompanying if at least 75% of the value of the company’s “qualifying assets” derives from interests in UK land and the person making the disposal has an investment of at least 25% in the company that holds UK land as an investment. This 75% is not reduced by liabilities and is truly based on the market value of the assets of the company.
However indirect disposal does not apply where:
- land used in a continuing trade is also disposed of.
- Two or more companies are sold by the same investor at the same time and property richness test would not apply if the disposal is considered as one transaction. The trading exemption is likely to benefit investors in the retail and hotel industry.
A person needs to submit a non-resident Capital Gains Tax return if any UK property or land sold or disposed. More information is accessible in the draft guidance issued by GOV.UK – Non-resident capital gain from 6 April 2019.
Different rules are vested under Capital Gain Tax for temporarily non-resident those make disposals during a tax year either they were:
- non-resident in the UK.
- overseas as a part of a split year.
If temporary non-resident rules are met then the portion of gain not charged under such will be considered under the scope of UK Capital Gains Tax for the year or period of return to the UK. However if one do not meet the temporary non-resident rules, then there will not be an additional UK Capital Gain Tax charge for the earlier disposal on the return to the UK. Individuals in this regards including trustees and executors or personal representatives of a deceased person are entitled to the Capital Gains Tax Annual Exempt Amount(AEA). While concerned about what tax to pay if you are a non-UK resident individual one may use non-resident Capital Gain Tax calculator if you have sold or disposed of a UK residential property.
Also one need to keep records to support the gains or losses reported to HMRC.