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Introduction to this document

Non-resident CGT charge election

Since 6 April 2015, non-UK residents have been liable to capital gains tax (CGT) on disposals (sale or transfer) of UK residential property. Where this rule applies the cost of the property for CGT purposes (the “base cost”) is its value at 6 April 2015. However, an election to use a different base cost can be made.

General rule

Before 6 April 2015 you could avoid paying UK CGT on disposals of UK assets by becoming non-resident prior to making the disposal. Provided you left the UK and spent at least five tax years as a non-resident, there is no tax. This changed on 6 April 2015, since when non-residents are required to pay CGT on disposals of UK residential property which result in a gain.

Under the new rule the gain is normally worked out as the difference between the value of the property at 6 April 2015 and the sale proceeds, or the value of the property at the time it is transferred for less than market value, e.g. where it’s given away.

Example. Jenny owns a property in London, but lives in Monaco. The property was purchased in 1998 for £300,000. Jenny sells it in 2018 for £1.5 million. The property was worth £1.3 million on 6 April 2015 according to the district valuer, and so tax is payable based on a gain of £200,000, not £1.2 million.

 

Alternative basis

You can make an election to be taxed on the “whole period” basis instead. This means calculating the gain based on the whole period of ownership rather than using the rebasing date of  6 April 2015. This can be worthwhile where a capital gain results from using the rebased cost, but a lesser gain or a loss by using orignal cost. It is also useful where private residence relief (PRR) is available for periods prior to 6 April 2015 that would reduce the taxable gain below the amount that would be chargeable without the election.

Example. John purchased a property for £200,000 in April 2000, and lived in it until April 2015 when he moved abroad. The property has been unoccupied since, and was worth £500,000 on 6 April 2015. John sells it for £1 million in April 2020. Using the default method will mean a gain of £462,500 (allowing PRR for the final 18 months). If John elects for the alternative method, this will reduce to just £140,000. The gross gain is higher, but the additional 15 years PRR makes it worthwhile.

Making the election

The election has to be made on the non-resident CGT charge tax return, and a calculation must be included.

Time limit

The return must be filed within 30 days of completion.