CGT for non-resident property owners - Changes ahead

Up until now, non-residents who own investment properties in the UK have not been subject to UK Capital Gains Tax ("CGT").

From 6 April 2015 this will change and non-UK residents will be subject to CGT on gains when they dispose of UK property. The only exceptions are certain classes of communal property such as care homes, children's homes or purpose-built student accommodation.

Tax rates will be basically the same as those for UK residents, with individuals taxed at 18%/28%, and companies (which will still get indexation allowance) at 20%.

There is good news in that tax will be charge only on the part of the gain which arises after 6 April 2015: the taxpayer will be able to choose either to apportion the gain on a time basis or to treat the property as having been acquired on 6 April 2015 at its market value on that date.

In addition the government has recently announced that non-residents will be able to claim the usual UK annual exemption from CGT

The situation for permanent non-residents selling before 6 April 2015 remains the same – there will be no CGT to pay.

Non-residents holding properties at that date should consider obtaining, if not a formal valuation, then at least some contemporary evidence of the market value as at 6 April 2015 rather than leaving it until the properties are disposed of, possibly many years on. This will allow them to minimise any tax payable by electing for the most beneficial treatment.

To avoid non-residents avoiding tax by designating their UK property as a tax-exempt "main residence" the rules on "main residence" elections (where a taxpayer with more than one home can choose which qualifies for exemption from CGT) are to be changed. A non-resident will be unable to designate a UK property for a tax year unless he spends at least 90 days in it in the year,  which would in many cases mean jeopardising residence status.