Non Resident Capital Gains Tax

Non Resident Capital Gains Tax

Capital Gains Tax, more commonly abbreviated to CGT amongst taxation professionals, is a tax which is charged on the growth in value of an asset that an individual disposes of.

What is Capital Gains Tax?

Capital Gains Tax, more commonly abbreviated to CGT amongst taxation professionals, is a tax which is charged on the growth in value of an asset that an individual disposes of. The current rates of CGT for individuals is 10% (basic rate) and a top rate of 20% (these rates do not apply to the disposals of residential property as the rates for these disposals at 18% or 28%).

Additionally, all individuals receive a 0% tax free annual exemption amount for the first £11,700 of capital gains.

However, just like with all taxes, the treatment of how and who CGT applies to will differ for those individuals who are non-resident in the UK. Here we look at non resident capital gains tax issues in a bit more detail.

learning what are Capital Gains Tax

Non Resident Capital Gains Tax Issues

Firstly, we should remind ourselves that prior to 6 April 2015, if you were a non UK resident, there was non CGT payable upon any disposals on UK assets (whether this mean UK shares or property).

However, from this point onwards, HMRC amended the rules to bring non-UK residents into the scope of UK CGT. As a starting point, the only assets which would begin to fall into the scope of UK CGT would be UK situs residential properties. As such, only the gains arising since 6 April 2015 would fall under the scope of UK CGT for non resident individuals.

[Note – HMRC provided non-residents with 2 methods of calculating the portion of the gain which would be subject to UK CGT – (1) to rebase the asset as of April 2015 and therefore only calculate the gain since this point in time, or (2) calculate the gain over the total period of ownership but time apportion the gain since April 2015. HMRC allowed individuals to determine which method would yield the most optimal position].

 

Non Resident Capital Gains Tax Rate

The non resident capital gains tax rate is the same for UK residents in that this is 18% or 28% depending on the total amount of gains being realised by the individual.

The other main change is that upon a disposal by a non resident (individual and corporate), HMRC now require a non resident capital gains tax declaration to be filed within 30 days of completion. At present, no CGT is payable by the non resident at exchange or completion but this new reporting requirement was introduced in order to encourage non-residents to update HMRC in relation to their transactions. It should be noted that failure to comply with this 30 day submission requirement can lead to hefty penalties and interest charges being applied by HMRC. The CGT that will be payable (if the property is sold at a gain) will be payable under the normal self-assessment tax return rules.

Although the above only applies to residential property, the same rules apply to non-resident corporate bodies who also fall under the above rules as they also begin to suffer capital gains tax on UK property.

Over the years to come, it is anticipated that non resident capital gains tax rules will continue to change with the possibility of further assets being brought within the scope of UK capital gains tax for those non residents.

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