Capital Gains Tax for expats & non-residents
Basics – how to calculate your Capital Gain / Loss
|Proceeds of sale less any selling costs||X|
|Cost of asset including purchase plus any enhancement expenditure*|| Y
*If the asset was purchased before 31st March 1982 then cost is substituted with the market value on this date plus any enhancement expenditure after this date.
Enhancement expenditure does not include any items of maintenance or finance costs. If you carry out work on a property and then sell it immediately, this may be treated as trading income rather than a capital gain.
Capital Gains Tax rules affecting non-residents who own UK property
Prior to 6th April 2015, most Non-Residents were not liable to Capital Gains Tax on the sale of any property in the UK.
Residential property (after 5th April 2015)
If you dispose of a dwelling in the UK, you are liable to tax on the Capital Gain. If you owned the property at 5th April 2015 then the assessable gain is for the period from 5th April 2015 to the date of disposal.
Private Residence Relief may be available if you have lived in the property at any time and the annual exemption is available to set off against the gain.
If you owned the property on 5th April 2015, you can either:
1. Claim the market value of the property at 5th April 2015 against the proceeds of sale (the default position). The gain/loss is the difference between the sale proceeds (less costs) and the market value at 5th April 2015 (plus any enhancement expenditure after this date). This is the default position.
If the property was your principal private residence at any time prior to 5th April 2015 then you can claim the last 9 months. Lettings Relief can only be claimed if you live in the property at the same time as the tenant which will not normally be applicable for non-residents.
2. Elect to time apportion the gain over the total period of ownership and then the amount chargeable would be the portion which relates to after 5th April 2015.
3. Elect for the retrospective basis to apply which means that the whole gain/loss is taken into account. You may want to do this if there is a loss or principal private residence relief gives a lower gain over the whole period.
The elections in 2 and 3 are irrevocable once made.
Non-Residential property (after 5th April 2019)
If you dispose of a commercial building, land or shares in a company where you own 25% or more of the shares and 75% or more of the company’s assets are land and/or buildings in the UK, you are liable to tax on the Capital Gain. If you owned the property at 5th April 2019 then the assessable gain is for the period from 5th April 2019 to the date of disposal.
You can either:
1. Claim the market value of the property at 5th April 2019 against the proceeds of sale (the default position). The gain/loss is the difference between the sale proceeds (less costs) and the market value at 5th April 2019 (plus any enhancement expenditure after this date).
2. Elect for the retrospective basis to apply which means that the whole gain/loss is taken into account. You may want to do this if there is a loss but you could not claim the loss on the disposal of shares in a company.
In all cases
If you are non-resident for less than five whole tax years any capital gains which you make on any other assets (which are not dwellings sold after 5th April 2015, other immovable property sold after 5th April 2019 or assets used in a trade in the UK) whilst abroad, may be taxed in the year you return unless those assets were acquired and disposed after you became non-resident.
Apart from dwellings sold after 5th April 2015, other immovable property sold after 5th April 2019 or assets used in a UK trade and you returning to the UK within 5 tax years, there is no Capital Gains Tax if you are a non-resident.
YOU MUST MAKE A RETURN OF THE DISPOSAL OF ANY LAND OR BUILDINGS AND PAY ANY APPLICABLE CAPITAL GAINS TAX WITHIN 60 DAYS OF THE DATE OF COMPLETION OF THE SALE.
Please see the following:-
The return has to be made whether you complete a self-assessment return or not.
If you complete a self-assessment return, you will still need to return the gain on the tax return and if there is a difference in your original estimate of the tax then you will need to pay the difference by 31st January after the relevant year of assessment.
You should also confirm your tax reporting requirements in the country where you reside with a local tax adviser.
© Thandi Nicholls Ltd 2023 All Rights Reserved – The above articles are provided for guidance only and may not cover your personal circumstances so you should not rely on them. It is important that you seek appropriate professional advice which takes into account your personal circumstances where you can provide the full facts of the case and all documents related to your case. Thandi Nicholls Ltd t/a uklandlordtax.co.uk, S S Thandi and M S Bains cannot be held responsible for the consequences of any action or the consequences of deciding not to act.
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