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UK Capital Gains Tax for Non-Resident Trustees

11th March 2015

The UK Capital Gains Tax regime will be extended from April 2015 to gains accruing to a non-resident persons on the disposal of UK residential property. In parallel, access to “private residence” relief will be restricted for non-UK residents and UK residents with homes overseas. 

Non-UK resident persons are defined as:

  • Non-UK resident individuals;
  • Non-UK resident trustees;
  • Personal representatives of a deceased person who was non-UK resident; and
  • Non-UK resident close companies, except where the company itself or a controlling person is a qualifying institutional investor.

In a significant change to the UK tax system, the new legislation will bring into charge a gain on the disposal of all UK residential property, irrespective of value, including that used for letting purposes.  There are however exceptions for certain types of property used for communal use, such as boarding schools, nursing homes or purpose built student accommodation.

The Rate of Tax
The rate of tax for disposals by non-UK resident:

  • Individuals will be either 18% or 28% depending on their status as a basic or high rate tax payer;
  • Close companies will be 20%; and
  • Trustees will be 28%. HMRC intends that the CGT charge will take precedence over existing anti-avoidance provisions that attribute gains to settlors, or to beneficiaries of non-UK resident trusts on the distribution of capital to the UK and the matching to a pool of gains.  

Tax will be due within 30 days from the property being conveyed, unless the individual, trust or company already has an existing relationship with HMRC, such that the tax will become payable under the usual self-assessment rules.

Principal Private Residence (PPR) relief will be extended to non-UK resident individuals and trustees if they meet certain qualifying conditions.  These conditions are broadly that the person making the disposal or the beneficiary of the trust must be either resident in the same country as the property being disposed for tax purposes, or they spend a minimum of 90 days in the property being claimed as the PPR over the tax year.

The rules will not apply to gains accruing prior to 6 April 2015.  HMRC will allow either a “rebasing” at 5 April 2015, or a time-apportionment of the whole gain (or alternatively a computation over the whole period of ownership if a greater loss is desired).  Losses will however only be available to offset against future gains arising on UK residential property arising to the same non-UK resident, unless they become UK resident whereby these losses will then be available against general chargeable gains.

Non-UK resident owners of UK residential properties should consider having the properties valued at the beginning of April.

Annual Tax on Enveloped Dwellings (ATED)
Separately, the ATED regime has also been increased and extended.  The new charges will be: 

  • £3,000 (from 1 April 2016) for properties valued at more than £500,000 but not more than £1million;
  • £7,000 (from 1 April 2015) for properties valued at more than £1million but not more than £2million;
  • £23,350 for properties valued at more than £2 million but not more than £5million;
  • £54,450 for properties valued at more than £5 million but not more than £10 million;
  • £109,050 for properties valued at more than £10 million but not more than £20 million; and
  • £218,200 for properties valued at more than £20 million.

The Annual Tax on Enveloped Dwellings (ATED) related CGT charge at 28% will continue to apply.  Where both CGT charges potentially apply, ATED-related CGT will take precedence and any remaining gains will be taxed under the new non-UK resident CGT rules.  

For further details and assistance contact Alan Kitcher, Trust Manager, on akitcher@haysmacintyre.com

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