I recently wrote about changes to Capital Gains Tax (CGT) for non-residents which were announced\u00a0in the Autumn 2013 Statement. This stated that a CGT charge would be introduced for non-residents\u00a0for gains made from the sale of UK residential property from April 2015.<\/p>\n
On March 28th, a new consultation document was issued by the Government so I thought it might be\u00a0useful to update you with the latest changes it contains.<\/p>\n
\u201cImplementing a Capital Gains Tax charge on non-residents\u201d<\/strong> Once feedback has been considered, the scope and structure for the implementation of the charge will\u00a0be published \u2013 this can involve significant changes being made between the consultation process and\u00a0the final legislation.<\/p>\n Why is the UK Government introducing CGT for non-residents?<\/strong> The Government also wants to ensure the new tax system is simple to administer and not open to Key points:<\/strong> Applicable to all residential property owners<\/strong> No minimum property value<\/strong> CGT rates<\/strong> Annual Exempt Amount<\/strong> Private Residence Relief<\/strong> A new type of Capital Gains Tax for overseas companies<\/strong> Payment through a withholding tax<\/strong> CGT rates for companies<\/strong> Our opinion<\/strong> For overseas investors, the key point is that CGT will only apply to future gains (from April 2015) and\u00a0therefore there is no tax advantage in selling now, before it is implemented.<\/p>\n Investors will have to arrange some sort of rebasing or valuation in April 2015 to ascertain the value\u00a0of their property\/properties in order to calculate future gains.<\/p>\n There are still key questions to be addressed and there may yet be significant feedback and changes to\u00a0the consultation document.<\/p>\n My belief is that investors should look at the bigger picture – the increase in London property values is\u00a0showing no signs of weakening and investors continue to make excellent returns, even if new rules\u00a0mean that a percentage of this will now be paid in taxes. And the new rules only bring taxes for\u00a0overseas investors into line with those paid by UK residents.<\/p>\n London property has always been resilient to changes and remains a safe haven for investors. We do\u00a0not expect these changes to make any difference to this.<\/p>\n By Vidhur Mehra, Finance Director<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":" I recently wrote about changes to Capital Gains Tax (CGT) for non-residents which were announced\u00a0in the Autumn 2013 Statement. This stated that a CGT charge would be introduced for non-residents\u00a0for gains made from the sale of UK residential property from April 2015.<\/p>\n","protected":false},"author":1,"featured_media":12658,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-12770","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-benham-reeves"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.benhams.com\/news\/wp-json\/wp\/v2\/posts\/12770","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benhams.com\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benhams.com\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benhams.com\/news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benhams.com\/news\/wp-json\/wp\/v2\/comments?post=12770"}],"version-history":[{"count":1,"href":"https:\/\/www.benhams.com\/news\/wp-json\/wp\/v2\/posts\/12770\/revisions"}],"predecessor-version":[{"id":12771,"href":"https:\/\/www.benhams.com\/news\/wp-json\/wp\/v2\/posts\/12770\/revisions\/12771"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.benhams.com\/news\/wp-json\/wp\/v2\/media\/12658"}],"wp:attachment":[{"href":"https:\/\/www.benhams.com\/news\/wp-json\/wp\/v2\/media?parent=12770"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benhams.com\/news\/wp-json\/wp\/v2\/categories?post=12770"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benhams.com\/news\/wp-json\/wp\/v2\/tags?post=12770"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\nThe new consultation document, called \u201cImplementing a Capital Gains Tax charge on non-residents\u201d
\nprovides a proposal on how the tax charge will be implemented and its impact: it asks for feedback
\nfrom interested parties by June 20th 2014.<\/p>\n
\nThe main principle behind the introduction of the new tax is one of fairness. It aims to ensure that the
\nsame Capital Gains Tax rules that apply to UK residents selling a property that is not their main
\nresidence also apply to non UK residents.<\/p>\n
\nabuse.<\/p>\n
\nNo exemption for rented properties<\/strong>
\nWhile the new Annual Tax on Enveloped Dwellings (ATED) and ATED related CGT have\u00a0exemptions for properties rented on a commercial basis, there will be no similar relief for the new\u00a0Capital Gains Tax.<\/p>\n
\nCGT will apply to all properties, whether the property is sold and the gain made by an individual or a
\ncompany.<\/p>\n
\nThere will be no minimum value (as there is for ATED and ATED related CGT).<\/p>\n
\nThe consultation document proposes that the CGT will be charged at the same rate as for UK\u00a0residents. For individuals that is 18% for basic rate tax payers and 28% for higher rate\u00a0taxpayers. The rate will depend on the total UK income in the tax year of sale.<\/p>\n
\nThere is an annual exempt amount (currently \u00a310,900) which it is proposed will also be available to\u00a0non-residents.<\/p>\n
\nUK residents do not pay CGT on the sale of their main home \u2013 this is known as Private Residence\u00a0Relief (PRR). If they have more than one home, they can choose which one is their main\u00a0residence. This PRR will also be available to non-residents. We have yet to find out what types of\u00a0evidence will be required to substantiate claims for PRR.<\/p>\n
\nUK companies selling a residential property pay Corporation Tax. The consultation document\u00a0suggests that overseas companies selling a residential property should also pay tax at an equivalent\u00a0rate, bringing UK and overseas companies into line. Previously overseas companies have been\u00a0exempt. The consultation suggests a tailored CGT for non-resident companies that is similar to the\u00a0UK Corporation Tax charge. Details are yet to be decided.<\/p>\n
\nIt is recognised that there will be difficulties in monitoring the declaration and payment of CGT by\u00a0non-residents.
\nTherefore, a withholding tax is proposed to be applied by the agents (usually the solicitor) deducting\u00a0the relevant amount of tax from the proceeds of a property sale before passing the remainder on to the\u00a0vendor.<\/p>\n
\nThe rate for companies and other entities has not yet been announced but is likely to follow the\u00a0Government\u2019s objective to be in line with that paid by equivalent UK entities.<\/p>\n
\nThere is nothing really new announced here and the new consultation document really only confirms\u00a0what was widely expected from the autumn statement.<\/p>\n