Under new policy, non-UK residents will be subject to a capital gains tax charge on the disposal of a UK residential property. It is however, important to note that the charge will only take effect for any gains that have been accrued after 6 April 2015, writes Adam Thompson.
Calculation of the gain
Taking into consideration the charges that will occur on gains accrued from 6 April 2015, HMRC have offered a choice of methods for calculating the chargeable gain.
Substituting the original cost of the property with its value as at April 2015 is the default method of calculation. However HMRC’s latest guidance states that it is not necessary to obtain a valuation at this time, instead the value should be obtained when you come to dispose of the property. You should be aware that it will be harder to reach a fair value for your property if the period between 6 April 2015 and the date of disposal is over a longer period of time.
HMRC have said that it is the individual’s responsibility to accurately record the value of the property by making a note of the overall condition of the property at April 2015, to help establish a valuation at a later date. Whilst HMRC may contend any valuation that is used for the purposes of calculating a gain on disposal, we recommend investing money in an official valuation by a few estate agents or a chartered surveyor.
Alternative methods of calculation are ‘straight line time apportionment’ or ‘the retrospective basis of computation’. The former should be self-explanatory and the latter, which only applies to properties bought after 6 April 2015, allows you to substitute its value at that date for cost.
Reporting the gain
If a non-resident is selling UK residential property after 6 April 2015, it is now necessary to advise HMRC within 30 days of the property being conveyed, via an online form, that the disposal has occurred. This applies whether or not you currently file UK tax returns. The date of conveyance is the date of completion. It should be noted that for capital gains tax purposes, the date of disposal is the date of exchange of contracts.
Payment of the capital gains tax
Subsequent liability payments depend entirely upon whether you have a requirement to file a UK tax return. If there is a requirement, payment of any liability can be made within normal self-assessment deadlines, therefore where a property is sold during the 2015/16 tax year payment is due by 31 January 2017.
However those who do not ordinarily file a UK tax return will be required to pay the liability within 30 days of conveyance. Once you have submitted the form notifying HMRC that the disposal has taken place, a reference number will be issued in order to make payment. We recommend that the form is submitted as soon as possible after the date of conveyance in order to allow maximum time for HMRC to issue the payment reference number and for payment to reach HMRC.
Adam Thompson is Tax Manager, The Fry Group