The Capital Gains Tax regime for non -residents

December 03, 2014

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By Rosalind Rowe, real estate tax partner

Last week the Government issued its response to the consultation document “Implementing a capital gains tax charge on non-residents” issued in March. This had set out the basis on which tax would be charged on gains realised by offshore investors in UK residential property. After the Autumn Statement today we can now see how the law reflects those intentions.

Property companies

The property industry will welcome clarification that the Government does not intend to broaden the scope of the charge and apply CGT to disposals of non-residential property. There was concern that taxing gains of offshore investors in residential property could be the beginning of a change of policy but it seems that offshore investors’ holdings of commercial, leisure, student accommodation and care homes will not suffer tax on gains.

Individuals and their homes

The proposal to abolish the 'main residence election' in favour of highly complex fact-based tests to decide which property would benefit from private residence relief – PRR - (where a person is not subject to tax on gains when they sell their  home) - has been scrapped. Instead, non-residents investing in UK residential property and UK residents investing in non-UK property have to meet an occupation test. 

It is much simpler.  If you are in your home for 90 midnights in a tax year you can nominate that property to benefit from the private residence relief. Importantly, there will be no change from the current rules for individuals who are UK resident and own only UK properties.