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Alan Collett

Disposals of UK Residential Property by Non Residents - Introduction of CGT charge in the UK

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Last week the UK Government released a summary of responses to the consultative exercise, and confirmed that the change is scheduled to come into effect from the start of the 2015/16 UK tax year – ie on the 6th of April, 2015.

 

The summary confirms that: The government believes that extending capital gains (CGT) tax to non-residents disposing of UK residential property is an important change that will improve the integrity of the tax system. This change will remove the current differences in treatment of UK and non-UK residents disposing of residential property, and will bring the UK into line with many other countries that charge CGT on the basis of the location of the property.”

 

Draft legislation will be included in Finance Bill 2015 and is due to be published next week, on the 10th of December.

 

The response document advises that it will still be possible to elect which property is the taxpayer’s Principle Private Residence (the PPR) for a particular year provided the taxpayer is either tax resident in the same country as the property, or is resident in the property for at least 90 midnights in that year. This rule will apply to non residents for their UK property, and to UK residents for a non UK property.

 

Only gains arising after 5th of April 2015 will be liable for the new charge. The capital gain will be calculated by default using a rebased cost as at 05/04/2015, with an option to calculate the gain based on the original cost on a time apportionment basis.

 

The change will only apply to residential property.

 

The vendor of the property will have to notify HMRC of the sale within 30 days, and if the vendor is already within the UK tax system the tax will be collected via Self Assessment.

 

A new system will be devised for non residents not already within the UK tax system, but they will need to make a tax payment along with the notification.

 

The rate of tax for non resident individuals will be the same as the CGT rates for UK individuals, which are currently 18% or 28% depending on the taxpayer’s total UK income and chargeable gains for the tax year.

 

Non resident individuals (ie most of those living in Australia) will have access to the annual exempt amount of taxable gains, in line with UK residents.

 

Further details are awaited in the Finance Bill, but we are recommending that those with UK property plan on the basis that a future disposal of a UK property after the end of the current tax year when non-UK resident will be subject to UK CGT, computed with reference to the value of the property on the 5th of April, 2015.

 

To the extent that the disposal is subject to capital gains tax in Australia we anticipate the CGT paid in the UK will be creditable against the CGT liability in Australia.

 

Best regards.


Managing Director, Go Matilda Visas - www.gomatilda.com

Registered Migration Agent Number 0102534; Registered Tax Agent (Australia)

Chartered Accountant (UK, and Australia)

T - 023 81 66 11 55 (UK) or 03 9935 2929 (Australia)

E - alan.collett@gomatilda.com and acollett@bdhtax.com

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Thanks for posting Alan.

 

Therefore it would be prudent to have a market appraisal carried out for our UK properties about this time?

 

KR

 

Andy


Financial Adviser (FPA Member AFP ®) Specialising in UK Expat Advice and Pension Transfers / AR-322874 /AFSL-234951

SMSF Accredited Adviser / UK SIPP Authorised Adviser 

Director  - Vista Financial Services – www.vistafs.com.au 08 8381 7177

 

Please note that my advice is general advice only and professional financial advice should be sought for your own personal situation.

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Hi Andy.

 

Yes, I think so.

 

Best regards.


Managing Director, Go Matilda Visas - www.gomatilda.com

Registered Migration Agent Number 0102534; Registered Tax Agent (Australia)

Chartered Accountant (UK, and Australia)

T - 023 81 66 11 55 (UK) or 03 9935 2929 (Australia)

E - alan.collett@gomatilda.com and acollett@bdhtax.com

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Thanks for posting Alan.

 

Therefore it would be prudent to have a market appraisal carried out for our UK properties about this time?

 

KR

 

Andy

 

When you say 'market appraisal' do you mean valuation?

 

I had a valuation done on my property within a few weeks of arriving in Oz a few years ago. What purpose does it serve having another valuation done around 5th April 2015?

 

Thanks

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When you say 'market appraisal' do you mean valuation?

 

I had a valuation done on my property within a few weeks of arriving in Oz a few years ago. What purpose does it serve having another valuation done around 5th April 2015?

 

Thanks

 

 

Because that date will be the reference point for UK CGT payable by non UK residents on the disposal of UK residential property going forwards.

 

Best regards.


Managing Director, Go Matilda Visas - www.gomatilda.com

Registered Migration Agent Number 0102534; Registered Tax Agent (Australia)

Chartered Accountant (UK, and Australia)

T - 023 81 66 11 55 (UK) or 03 9935 2929 (Australia)

E - alan.collett@gomatilda.com and acollett@bdhtax.com

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Because that date will be the reference point for UK CGT payable by non UK residents on the disposal of UK residential property going forwards.

 

Best regards.

 

That actually sounds like good news to me. If I read it right - if I sell my property on or about April 5th then my capital gain will be approximately zero. Is that correct?

 

Cheers

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That actually sounds like good news to me. If I read it right - if I sell my property on or about April 5th then my capital gain will be approximately zero. Is that correct?

 

Cheers

 

 

For UK tax purposes - yes.

 

Don't overlook the possible CGT position in Australia though.

 

Best regards.


Managing Director, Go Matilda Visas - www.gomatilda.com

Registered Migration Agent Number 0102534; Registered Tax Agent (Australia)

Chartered Accountant (UK, and Australia)

T - 023 81 66 11 55 (UK) or 03 9935 2929 (Australia)

E - alan.collett@gomatilda.com and acollett@bdhtax.com

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I wasn't aware I could be taxed twice for the same asset?

 

 

Well you are now! :wink:

 

You should be able to claim a credit for tax paid in the UK if there is a CGT position in Australia for the disposal of the same asset.

 

Best regards.


Managing Director, Go Matilda Visas - www.gomatilda.com

Registered Migration Agent Number 0102534; Registered Tax Agent (Australia)

Chartered Accountant (UK, and Australia)

T - 023 81 66 11 55 (UK) or 03 9935 2929 (Australia)

E - alan.collett@gomatilda.com and acollett@bdhtax.com

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Thanks Alan.

 

If my reading of the situation is correct I think I should be Ok for a year or two more before I get affected to any great extent. Currently if I were to sell today I have a significant Capital Gains loss here in Oz due to the exchange rate at the time of moving here was significantly more than it is now and the property was valued greater than todays vaue. It would take large rises in my UK property and/or in exchange rates for this to change. Coupled with the froth appearing to come off the UK property market now after a period of growth, any capital gains in GBP I will have made will be swallowed up by selling expenses should I decide to sell.

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I don't think this is going to affect many people in Australia. If you were renting out the property in the UK then you were liable for CGT in the UK already. It's only those people rich enough to be able to afford their UK home to be standing empty that are now going to be hit with CGT in the UK that they weren't previously liable for. In either case they're likely to be liable to Australian CGT which their UK bill can be put towards.


Chartered Accountant (England & Wales); Registered Tax Agent & Fellow of The Tax Institute (Australia)

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I don't think this is going to affect many people in Australia. If you were renting out the property in the UK then you were liable for CGT in the UK already. It's only those people rich enough to be able to afford their UK home to be standing empty that are now going to be hit with CGT in the UK that they weren't previously liable for. In either case they're likely to be liable to Australian CGT which their UK bill can be put towards.

 

 

Hello Ken.

 

You say: If you were renting out the property in the UK then you were liable for CGT in the UK already.

 

At present if you are not UK resident you are not subject to UK CGT on a let property in the UK.

 

Best regards.


Managing Director, Go Matilda Visas - www.gomatilda.com

Registered Migration Agent Number 0102534; Registered Tax Agent (Australia)

Chartered Accountant (UK, and Australia)

T - 023 81 66 11 55 (UK) or 03 9935 2929 (Australia)

E - alan.collett@gomatilda.com and acollett@bdhtax.com

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Thought he was wrong, but thank you Alan for confirming that.

we are taxed in UK as all as our income comes from there, and as the new rules mean only the increase in the amount the property is worth from April this year will be affected we aren't too worried, even Though one property is in London! Thank goodness it won't apply from when we bought it!!!!

thank you for suggesting to get up to date property price estimate good advice.

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Thanks Allan, extremely useful.

 

Can anyone please help me with this:

 

I read somewhere that for residents in Australia the ATO considers a UK owned property as your primary residence for the first 6 years you are resident in Australia, as long as you have not purchased a house in Australia in the meantime. Which means that the capital gains tax would be applied at the same rate a primary residence in Australia would suffer from. Have I got this right?

 

Thanks,

Ben

Edited by BenK
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Hi All

Would be interested in any responses to Ben's query above, but also if anyone could shed some light on the following I'd appreciate it!

I am in the process of selling my share of a property in the UK which has been let for the last 6 years - I'm hoping this will be completed before April. Aside from UK tax, does anyone know if and how I will be taxed in Australia when I transfer the money across? I am an Australian resident, British citizen.

Thanks

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Hi Just a question from me. Does anyone have any idea what serves as a valuation? I have an email from a hotmail account from my estate agents - But I'm pretty sure the HMRC won't accept this. What is an 'official' valuation for HMRC purposes?

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Hi Kirk

 

Taken directly from HMRC FAQ: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/413988/capital-gains-tax-non-uk-res.pdf

 

Q5

Can I use an estate agent’s valuation? How many valuations do I need to get?

A5 It is your responsibility to accurately value the property. Depending on the property concerned you may want to use a professional valuer or obtain more than one valuation. You can ask HMRC to check your valuation by using form CG34, however, as this process takes at least 2 months and can only be made after disposal you will need to report the disposal and pay the tax due within 30 days of the property being conveyed (see Q13 below). If necessary an amendment can be made to your NRCGT return.


Financial Adviser (FPA Member AFP ®) Specialising in UK Expat Advice and Pension Transfers / AR-322874 /AFSL-234951

SMSF Accredited Adviser / UK SIPP Authorised Adviser 

Director  - Vista Financial Services – www.vistafs.com.au 08 8381 7177

 

Please note that my advice is general advice only and professional financial advice should be sought for your own personal situation.

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Thanks Alan for posting on is subject. I've read the posts & some of the links but I'm slightly unclear on how it might affect my personal circumstances & was wondering if you could perhaps advise? We moved to Australia 7 months ago & have rented out our UK home on the basis that we don't know if this is a permanent move or if we might want to return. I recall reading something about a limit on the number of years you can be away for (some people mention 6 years) before CGT applies? Also, I'm not sure whether the Private Residents Relief & the Annual Exempt Allowance apply? I'm just trying to understand what the implications are for us & if there's a specific time at which it makes sense for us to be making a decision about whether to keep or sell our house - any advice anyone can give me would be most appreciated. Thank you!

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I had a quote last night from Savills for a valuation for tax purposes.

 

It was UKP1200 + VAT. I fell off my chair. :err:

 

Does a valuation for tax purposes really need to be a detailed report? I was thinking someone with a RICS membership could give the place a once over and then simply report a number rather than spending hours drafting a report. Or am i living in dream world.......

 

 

QUOTE=Andrew from Vista Financial;1936728535]Hi Kirk

 

Taken directly from HMRC FAQ: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/413988/capital-gains-tax-non-uk-res.pdf

 

Q5

Can I use an estate agent’s valuation? How many valuations do I need to get?

A5 It is your responsibility to accurately value the property. Depending on the property concerned you may want to use a professional valuer or obtain more than one valuation. You can ask HMRC to check your valuation by using form CG34, however, as this process takes at least 2 months and can only be made after disposal you will need to report the disposal and pay the tax due within 30 days of the property being conveyed (see Q13 below). If necessary an amendment can be made to your NRCGT return.

Edited by poolprouk

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