This is a topic I have mentioned in several articles on this website but the final guidance has now been issued by Her Majesty’s Revenue & Customs (HMRC) so we have clarity as to how tax will be applied on the sale of UK properties owned by individuals who are not resident in the UK.
Non-resident individuals will be entitled to the same annual exemption as UK residents i.e. the Personal Allowance of £11,300 in 2017/18. Assuming the non-UK resident has no taxable UK income, then gains in excess of approximately £50,000 on disposal of UK residential property in a tax year will fall within the 28% CGT charge.
What is a principle private residence?
This is generally the home of a UK resident so they are not taxed on the sale of the property but becomes a little more complicated once someone leaves the UK. In order to be considered a principal private residence (PPR) the following must apply:
- The property has been your main home since you bought it
- It hasn’t been rented out and you haven’t had lodgers
- You haven’t used part of it purely for business
- The size of the plot is no more than 5,000 square metres (just over an acre) in total
- It wasn’t purchased as an investment
Once a person is deemed UK non-resident for tax purposes any property they own in the UK cannot be a PPR as it is essential that they spend at least 90 days in any tax year in the property and that would make them a UK resident.
There was previously an exemption for the last three years, but this was reduced to just 18 months with effect from April 2014.
Previously when the valuation of a property was required when calculating a capital gain figures from the Land Registry have been used but we now understand that formal valuations obtained by property owner, from reputable sources, can be used. This means employing a surveyor rather than relying on an estate agent.
HMRC has issued only brief general guidance. The valuation should ideally be obtained as near to 6 April 2015 as possible as this will provide the best evidence of the property’s market value at that time and so greater certainty. Whilst a historic valuation could be obtained at the time of a future sale this may be less secure as HMRC might well challenge any valuation which they consider to be unrealistic
It would also be sensible to record the overall condition of the property and any unusual features as this will help verify the value, especially for a non standard property.
For more information, or to arrange a meeting to discuss your circumstances, please contact me at email@example.com