The offices of the taxman are not usually credited with efficiency and success. But there is one aspect of HM Revenue & Customs which is terrifyingly efficient, and that is its powerful computer program which is accessing and trawling databases of personal financial information on an unprecedented scale.
Hands up if you still own a property in the UK, but have residential status in Tenerife, or indeed anywhere else in the world?
If you’re one of the many thousands of expats, who decided to keep a foothold in the UK property market, ´just in case´, then potentially, you may well be out of pocket when you decide it´s time to sell. This is yet another one of the latest steps in a series of significant changes affecting the taxation of UK residential property in recent years. Up until the 6th of April 2015, non-UK residents have always enjoyed being exempt from Capital Gains Tax (CGT) on private residences, and also had the right to claim Private Resident Relief… regrettably for many, this is no longer an option – the rules have now changed! Capital Gains Tax (CGT) has been extended to non-UK residents with effect from the 6th of April this year.
From April 6th this year, individuals who do not spend sufficient time in the UK, or have insufficient ties with the UK to be resident there for tax purposes but who nonetheless own a home in the UK, may now need to pay capital gains tax (CGT) on any gains arising on the eventual sale of the property.
How will the tax work?
Only gains made from 6th April 2015 are taxable in calculating the gain on the property disposal i.e. non-UK resident property owners will substitute the value of the property as at 6th April 2015 for its actual acquisition cost, thereby rebasing the value to its market value as at that date. Alternatively, property owners may elect to calculate the gain by using the actual acquisition cost but paying tax only on the time-apportioned post-5th April 2015 part of the gain.
If the non-resident usually files a UK self assessment tax return any gain must be included in the appropriate year’s return, otherwise any tax must be paid within 30 days of completion. Non-residents will continue to be exempt from CGT on disposals of commercial property and other assets.