Synopsis: The Government has launched its initial consultation following the Autumn Statement announcement that CGT will be extended to apply to non UK residents who dispose of UK residential property from April 2015. The consultation will run until 20 June 2014.

Date posted: Thursday, April 10, 2014

In the Autumn Statement the Chancellor announced that the Government would consult on extending the payment of capital gains tax (CGT) to non-UK residents who dispose of UK property from April 2015. Following this announcement the Government has published its initial consultation document which can be found here.

Historically, non-resident individuals, companies and trusts were outside the scope of UK CGT so that their investment gains were not taxed. In April 2013 the Government introduced a CGT charge payable by companies and some collectives at 28% on gains made on disposals of interests in high value residential (personal use) properties that are subject to the Annual Tax on Enveloped Dwellings (ATED). However, dwellings which are purchased purely on a commercial basis (for example a property rental business), or held for charitable purposes are exempt from ATED-related charges.

The referred to consultation paper is aimed at improving the ‘fairness’ of the UK tax system and, to that end, proposes the extension of CGT to gains made on disposal of UK residential properties to all non-UK residents – whether individuals, partners, companies or trusts.

Individuals who come within the scope of the new rules will be charged to CGT at the same rates as UK resident individuals, subject to an annual exemption and companies will be chargeable to corporation tax in the same way as UK resident companies, but a specific CGT regime (the ‘tailored charge’) will be applied to them, at a rate of tax to be announced.

Further, it appears that no exemptions from the charge are being considered for commercial property aside from communal use properties such as care homes, boarding schools and student halls of residence. This means that genuine property rental businesses could be caught within the new regime as it stands.

However, it does seem that the principal private residence (PPR) exemption will be extended to non UK resident owners. But, in order to prevent non-UK residents simply electing that the UK residence is their PRR, it is proposed that this will have to be determined as a question of fact by looking at which residence someone has mainly occupied during the year.

This effective removal of the right to elect for PPR will also, it seems, apply to UK resident multiple property owners who will have the factual test (possibly based on actual days of residence) applied to them too. Some commentators have observed that this proposed new PPR test will give rise to considerable evidential difficulty.

The consultation period runs until 20 June 2014 and it is expected that legislation will be drafted following the Autumn Statement next December.


As ever, until the details of these changes are fully known it is difficult to comment on any viable planning options. That said, the outcome of the consultation will no doubt prove to be interesting given that a wider group of taxpayers (i.e UK residents as well as non-UK residents) will be caught by some of these changes. Further, in relation to non-UK resident property owners, it will also be inevitably important to take account of any double taxation agreements and the effect that these will have on the impact of these changes on those affected.

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