Autumn Statement 2013: Non-UK residents subject to capital gains tax on residential property from April 2015

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Non-UK residents will pay capital gains tax (CGT) on disposals of UK residential property from 6 April 2015.

Non-resident 'non-natural persons' (e.g. non-resident companies) are already subject to CGT on disposals of UK residential property worth £2m+ (subject to certain reliefs) following changes introduced by Finance Act 2013. This new charge will apply to individuals and is also likely to apply to trustees and personal representatives.

Indications are that the charge will only apply to gains which accrue post 5 April 2015, but this together with the extent of any reliefs which will be available (including principal private residence relief) will be subject to consultation in early 2014.

Finance Act 2013 extended CGT to non-resident companies owning UK residential real estate worth more than £2m+ - but the charge does not apply where the residential property is let out on a commercial basis to unconnected third parties throughout the period of ownership, or is held as part of a property trading or development business.

To ensure fairness:

  • the new charge announced today should only apply to disposals of residential real estate for more than £2m;
  • the new charge announced today should not apply where the property is held as part of a property trading or development business, or has, throughout the relevant period of ownership, been let on a commercial basis to a third party;
  • in addition, if a non-resident individual only has one home in the UK any gain within this new charge should potentially be relieved from CGT by virtue of the existing principal private residence relief.

This change will be perceived as an appropriate levelling of the playing field between UK resident and non-UK resident individuals, and it is not out of step with other major economies.

However, these reforms ought to have been considered as part of last year’s extensive consultation on the taxation of UK property held by non-resident entities. Given those changes, this new charge should be subject to the same conditions and reliefs, in order to avoid anomalies arising between the taxation of personal and corporate holdings of residential property.

In order to prevent any further undermining of the stability of the UK tax regime for international individuals, it would be helpful if the Government could confirm whether there will be any further changes to the taxation of residential property for the remainder of the current parliament.

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