NRCGT – Don’t Miss The Deadline!
Historically, only UK resident individuals and entities, together with temporary non-UK resident individuals and those operating through a UK permanent establishment, branch or agency, were subject to UK capital gains tax (CGT), while non-UK residents were not. However, Finance Act 2015 introduced rules, so that from 6 April 2015 the CGT regime was extended to non-UK residents disposing of UK residential property. The Government was ‘apparently’ concerned at the disparity between how individuals and entities are taxed in the UK on disposals of UK residential property, compared to how other countries tax the disposal of residential property in their jurisdictions.
Essentially, individuals, personal representatives, trustees, companies and funds are subject to these new Non-Resident Capital Gains Tax (NRCGT) rules if the person is non-UK resident at the time of disposal and the disposal is of UK residential property. The rates of tax which apply are 18% (for basic rate taxpayers) and 28% (for higher rate taxpayers).
You must tell HMRC within 30 days of conveyance. For example, for a conveyance on 1 July you must report to HMRC no later than 31 July. You do this by reporting the disposal online using the Non-resident Capital Gains Tax return. This is needed even if you have no tax to pay, have made a loss or are already registered for Self-Assessment. If the property was jointly owned, each owner must tell HMRC about their share of the gain or loss in a similar way (presuming they are also non-UK resident).
You might also have to pay any non-resident CGT due within the same 30-day period, although there are exceptions to the ‘pay now’ rule if you already have an existing relationship with HMRC. If you are already registered for Self-Assessment, you can either pay when you submit the NRCGT return or alternatively defer payment until your normal due payment date, being 31 January following the end of the tax year in which the disposal took place.
HMRC may charge penalties if you miss the reporting deadline and will charge interest if you do not make full payment on time.
Calculating the Gains and Losses
Only the gain arising after 5 April 2015 is chargeable under the NRCGT rules. In fact, there are three possible methods of calculation as follows:
|Default Method||The dwelling must be valued as at 5 April 2015 and the chargeable gain is the difference between that figure and the net sale proceeds. The gain is pro-rated so that only days during which the land consists of or includes a dwelling are included. There are two alternatives available if the taxpayer so elects, set out below.|
|Straight Line Apportionment Method||If the taxpayer elects for this method, there is no need for a valuation. Instead the chargeable proportion of the gain is calculated on a days basis, with only the post-5 April 2015 proportion being taxable. As above, days during which the land did not consist of or include a dwelling are excluded.|
|Retrospective Basis of Computation Method||If the taxpayer elects for this method, the entire gain or loss is charged/relieved, not just the post-5 April 2015 proportion. This election is most likely to be useful where the disposal results in a loss as, under this method, the entire loss is allowable, but the use of the loss is restricted and only relievable against NRCGT gains.|
Written by: Mathew GillardTalk to Barnes Roffe today