New CGT rules for non-residents
Information is relevant on the moment of publication (April 2014)
The Government has now published its response to the consultation on extending Capital Gains Tax (CGT) to non-UK resident owners of UK residential property.
We now know more or less how the new charge will work:
Overall the proposals are perhaps not as serious as some had feared. For example, it was not previously clear whether gains relating to periods before April 2015 might be chargeable. And there had been talk of abolishing the ability to elect which of several residences was the main residence. That would have had major implications for many UK residents too.
Some particular points to note:
Whereas there are exemptions from ATED and ATED-related gains for companies owning properties which are let or being developed, gains on such properties would be subject to CGT. Nevertheless owning through an offshore company will often be the appropriate solution for such properties. In addition to the exemptions from ATED and ATED-related gains, there will normally be an exemption from Inheritance Tax (IHT) for those not domiciled in the UK for IHT purposes. With care, non-UK residents who spend 90 nights a year in the property can still sell it free of CGT. This will be a major relief to those who use their UK property as a holiday home. But they will need to take care to ensure that they are not UK resident for general tax purposes. This will depend on their particular circumstances but will include the overall number of days spent in the UK and what other connecting factors they have.
Property bought "off plan" will be subject to CGT even if there is a disposal before the property has been built. This means that anyone who has bought a property off plan will need before April 2015 to consider carefully the most appropriate holding structure.
There are new rules for UK residents claiming foreign properties as their main residences. They will now have to spend at least 90 nights in the property for a particular tax year to count towards the exempt period.
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