Capital Gains on UK property sold by non-UK residents – explained

What is the definition of Capital Gains Tax?

According to HMRC, Capital Gains Tax (CGT) is defined as – ‘A tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value. It’s the gain you make that’s taxed, not the amount of money you receive.’

For example, you buy a house for £100,000, but then decide to sell the same house at a later date for £150,000. This means you have made a capital gain of £50,000.

What do I do if I’m a non-UK resident and have sold UK residential property?

If you’re not living in the UK, but have sold or disposed of a residential property in the UK on or after 6th April 2015, keep reading because this post tells you everything you need to know, starting with how long you have to declare the sale of the property and HMRC’s definitions of whether you’re a UK resident or a non-UK resident.

How long do I have to declare the sale of UK residential property?

Non-UK residents are obliged to tell HMRC about any CGT on UK residential property within 30 days of the property sale; even if there’s no CGT to pay. For example, if you sell the property on 1st July 2018, you must make a declaration to HMRC by 31st July 2018.

You must report the disposal using the Non-resident Capital Gains Tax Return within this deadline even if:

  • There’s no tax to pay
  • A loss has been made
  • You’re registered for Self-Assessment
  • You’re registered with HMRC for Corporation Tax

If the property in question was owned by more than one individual, each owner must complete the Non-resident Capital Gains Tax Return.

UK resident vs non-UK resident

UK resident

You’re always going to be classed as a UK resident if:

  • You spend 183 or more days in the UK in the tax year
  • Have a home in the UK – you must have owned, rented or lived in this property for at least 91 days in total – and spent at least 30 days in the country in the tax year

These are just a couple of the ways you can qualify as a UK resident, but it’s not always this simple and some cases can be very complex, so it’s always best to seek expert advice rather than make any assumptions.

Non-UK resident

You’re always going to be considered as a non-UK resident if:

  • You spend less than 16 days in the UK (or 46 days if you haven’t been classed as a UK resident for the three previous tax years)
  • Work abroad full-time (averaging at least 35 hours a week) and spend fewer than 91 days in the UK, of which no more than 30 were spent working

If you need more of a steer on whether or not you fall into the UK resident or non-UK resident bracket, get in touch and we’ll be more than happy to help you identify the correct status.

Calculating payment

You may have to pay any CGT within the same 30-day period you have to declare your disposal. However, there are possible exceptions, such as being enrolled in Self-Assessment. If this is the case, then you can either pay the outstanding tax liability when you submit your Tax Return or on your normal payment date – the first 31st January after the end of the relevant tax year.

However, with all of the various different categories, rules and deadlines relating to CGT for non-UK residents, it can be confusing and difficult to know if your calculations are correct and when you need to submit payment by. Failure to report the sale of your property and pay any tax that’s owing can result in you receiving a penalty of £700 or 5% of any tax that’s due, whichever is greater.

Seeking specialist guidance and support, like the help that’s provided by our dedicated tax team, will guarantee that your CGT obligations have been established and calculated accurately and that you’ve fulfilled your HMRC obligations fully with minimum hassle and fuss.

If this post applies to you and you’d like a hand with any element of the CGT process, then please contact us on 01905 77600 or hello@ormerodrutter.co.uk.

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