The UK Government announced prior to the Autumn Statement that capital gains tax (CGT) will be extended to gains made by non-residents disposing of UK residential property from April 2015.

This change will remove the current differences in treatment

between UK and non-UK residents disposing of residential property

and will charge CGT based on the location of the property.

What is residential property?Residential property is defined as property suitable for use as

a dwelling, including property that is in the process of being

constructed or adapted for such use.

The scope of the chargeThe charge will apply to disposals of UK residential property

by non-resident individuals, non-resident trustees, personal

representatives of a non-resident deceased person and some

non-resident companies.

It should be noted that the CGT charge will take precedence

over the existing anti-avoidance provisions that attribute gains to

settlors and beneficiaries of non-resident trusts.

So who is excluded from the charge?

Diversely held institutional investors

Care homes and nursing homes

Certain types of communal accommodation

(e.g. purpose built student accommodation)

Pension funds

Non-UK resident investors in UK REITS

The CGT ratesThe rate for companies will mirror the UK Corporation Tax rate

which is currently 20%. Non-resident companies will have access

to a limited indexation allowance.

However, companies that are subject to the Annual Tax on

Enveloped Dwellings (“ATED”) will be subject to CGT at a rate of

28%. To prevent double taxation, where part of the gain could be

subject to both ATED-related CGT and the new CGT charge, the

ATED-related CGT charge will take precedence.

The CGT rate for non-resident individuals will be the same as the

CGT rates for UK individuals, currently 18% or 28% depending on

the individual’s total UK income and chargeable gains for the tax

year. Non-resident individuals will be entitled to the annual CGT

exemption (currently £11,100).

The rate of tax for non-UK resident trustees will be 28% and they

will be entitled to half of the CGT annual exemption.

Non-resident individuals within the scope of the new CGT charge

may be eligible for Private Residence Relief (PPR).

The extended CGT rate will not apply to the amount of gain

relating to periods prior to April 2015. A rebasing to the property’s

6 April 2015 market value is available to ensure the pre 6 April

2015 gains are not subject to the charge.

CGT lossesLosses on disposals of UK residential property will be ring-fenced

for use against gains on residential property that arise in the same

tax year. Any unused losses will be available to carry forward to

later years.

Capital Gains Tax on UK Residential Property

LTS-TAX.COM

Reporting a disposal to HMRCIndividuals and companies will need to deliver a return for the

disposal to HMRC within 30 days of the date of completion and

make a payment of the tax that is due. Where a person has an

existing relationship with HMRC (i.e. they submit UK tax returns),

they will be able to make a payment as part of their self-

assessment tax return instead, however, they must still notify

HMRC of the disposal within 30 days.

HMRC will need to be notified where there is a loss, or no gains on

the disposal of the property, or if any gains made are covered by

the annual exemption.

Stamp Duty Land Tax (SDLT)New rules have been introduced from 4 December 2014

regarding SDLT.

From this date the calculation of SDLT on purchases of residential

property will change so that rates apply to the portion of the

purchase price within each band (i.e. the same way Income Tax

is calculated), rather than a single rate applying to the entire

property price.

Under the new rules, if the property is valued at less than

£125,000 no SDLT will be payable. For properties valued at more

than £125,000 SDLT will be paid as follows:

PROPERTY VALUE BAND RATE

£0 - £125,000 0%

£125,001 - £250,000 2%

£250,001 - £925,000 5%

£925,001 - £1,500,000 10%

£1,500,001 + 12%

SDLT on corporate purchasesFrom 20 March 2014 corporate purchases of residential property

worth more than £500,000 will be subject to 15% SDLT. There are

reliefs available for purchases that are not subject to the ATED

regime e.g. property letting businesses, property trading and

development (refer to our ATED factsheet for more guidance) and

where relief applies then the new SDLT rates as set out above

will apply.

For further information please contact us on +44 (0)1481 755862

or email:

Simon Graham CTA

Managing Director, LTS Tax Limited

DD: +44 (0)1481 755880 T: +44 (0)1481 755862

E: simon.graham@lts-tax.com

Paul O’Neill CTA

Director, LTS Tax Limited

DD: +44 (0)1481 755882 T: +44 (0)1481 755862

E: paul.oneill@lts-tax.com

Francis Snoding CTA

Director, LTS Tax Limited

DD: +44 (0)1481 755881 T: +44 (0)1481 755862

E: fran.snoding@lts-tax.com

Mandy Connolly CTA

Associate Director, LTS Tax Limited

DD: +44 (0)1481 755872 T: +44 (0)1481 755862

E: mandy.connolly@lts-tax.com

Capital Gains Tax on UK Residential Property

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice You should not act upon the information contained in this publication without obtaining specific professional advice. No liability is accepted for any direct or consequential loss arising trom the use of this document. LTS Tax Limited (registration number 54292) is registered with the Chartered Institute of Taxation as a firm of Chartered Tax Advisers. LTS Tax Limited is licensed by the Guernsey Financial Services Commission. Please see our website www.lts-tax.com for details.

Registered office: 11 New Street. St Peter Port Guernsey, GY1 2PF.

LTS Tax Limited

PO Box 20, 11 New Street, St Peter Port, Guernsey, GY1 4AN, Channel Islands

T: +44 (0)1481 755862 F: +44 (0)1481 713369

www.lts-tax.com