From 6 April 2015 Residential Property located in the UK and owned by persons resident outside the UK will become subject to Capital Gains Tax. This is a major change for expats resident outside the UK and foreign investors, who have previously not been liable for any capital gains tax in the UK unless returning within 5 years of an earlier departure. The charge will apply to individuals, trustees, and certain closely held companies.
Benchmarking at 5 April 2015
It is strongly advised that individuals resident outside the UK should obtain a valuation of all UK residential property as held at 5 April 2015. HMRC will seek to tax only the element of gain on the property that has accrued after the advent of the new rules at 5 April 2015. There are three methods by which the gain may be calculated and the taxpayer may elect for the most beneficial. A likely election for many taxpayers will be to tax only the difference between market value at 5 April 2015 and the eventual sale price. As it may be extremely difficult to prove the market value at 5 April 2015 many years later an official valuation will safeguard your position. Please contact our team to further discuss the impact of the new rules and your options.
UK Expats and the principal private residence election
From 5 April 2015 a UK property may only be treated as your principal residence for the purposes of principal private residence relief if you are either tax resident in the country in which the property is located, or have spent at least 90 days in that property in the tax year. In practical terms this will make it extremely unlikely that a non-resident person may treat a UK property as their principal private residence. This will affect expats working outside the UK who have retained the UK family home, which would often be let under the non-resident landlord scheme. Lettings relief and temporary absence reliefs will still apply so long as the property has been a main residence at some point during ownership and other conditions are met. Again if you would like to discuss your position please contact our team.