Non-resident CGT

Since 6 April 2015 we have had to worry about non-resident clients who sold UK residential property, as they have to report the gain within 30 days of the completion date under the NRCGT rules. From 6 April 2019 the NRCGT regime is extended to all types of UK property, and the tax will also be payable within 30 days of completion for all such transactions.

The new NRCGT rules are a complete rewrite of the current rules. The new regime applies to any non-resident who disposes of UK land, buildings or structures, or of an interest an entity which derives more than 75% of its gross asset value from UK land (a property-rich entity).

The 6 April 2019 start date applies even for non-resident companies, as it’s a transaction-based tax not a trading-based tax. The NRCGT charge applies at normal CGT rates for individuals and trusts, but companies will pay corporation tax on the gain at the normal CT rate of 19%, due to drop to 17% from 1 April 2020. Any companies which would have paid tax on ATED-related gains can stop worrying about that, as the charge on ATED-related gains is abolished from 6 April 2019.

To test whether an individual is non-resident for the NRCGT rules, apply the statutory residence test (SRT). The residence status of a company is usually clear from where it was formed, and where the management and control is exercised from.

Indirect disposals of UK land are caught where the investor has a substantial interest (at least 25%) in a property rich entity at the date of disposal, and has held that investment at any time in the two years prior to the disposal. The indirect interest may be traced through a series of entities. There are also connected persons rules which can mean shareholdings by different people may have to be aggregated. However, if the entity uses the UK land for trading purposes that land is left out of account.

These new rules are complex, and the HMRC draft guidance is quite brief. The main thing is to be aware of is that the gain must be reported, and the tax paid, within 30 days of the completion date.

Written by the Tax Advice Network