Capital Gains Tax (CGT) extended to non-UK residents owning UK residential property
5 December 2013
As widely predicted, today's Autumn Statement by the Chancellor included an announcement that Capital Gains Tax (CGT) will be extended to non-UK residents owning UK residential property.
The details we have at present are scant, and there is going to be a consultation early next year. We are told that the change will have effect from April 2015 and that it will only apply to "future gains". Presumably this means that there will be some form of re-basing, so that the pre-April 2015 element of gain on a post-April 2015 sale will be exempt from CGT. It will be a major relief to non-residents that existing latent gains do not appear to be caught.
It is not yet clear whether the new CGT charge will apply to all UK residential property owned by non-residents. The new annual tax charge on high-value residential property owned by companies (which came into effect earlier this year) contained exemptions for development properties and properties which are let. In effect it usually only applies to property occupied by the beneficial owner or his family. Exempting development and let properties from the new CGT charge would significantly reduce its impact, as there is nothing to suggest that main residence relief will not be available where the property in question is (or has been elected to be) the owner's main residence.
Nevertheless non-residents looking to invest in UK residential property will need to factor in the new CGT charge. It may reduce the return on their investment significantly. Those who own properties already will want to consider the options carefully before April 2015. In some cases they may wish to dispose of the property before that date to ensure their investment has been tax-free, and thus to avoid having to submit a tax return.
The clear objective of the extension of CGT is to take some of the froth off the prime London residential property market. It remains to be seen what effect on property prices today's announcement will have.
For more information please contact Charles Hutton, Partner, and Dominic Lawrance, Partner