Capital Gains Tax on property owned by non residents

25 June 2014 Rachael Dronfield View all News

Historically, non-resident individuals, companies and trusts have not been liable to Capital Gains Tax (CGT) on gains arising from the disposal of residential property.

This began to change from last April with the introduction of the Annual Tax on Enveloped Dwellings (ATED), which is an annual CGT charge on personal-use residences worth more than £2m if owned via a limited company.

The government has recently published proposals to charge CGT on any disposals of UK residential property disposals taking place after April 2015, whether or not they are used as a second home or rented out.

Any gain arising, can potentially be covered by Principal Private Residence relief (PPR) where the property is or has been their main residence. Individuals owning more than one residential property can currently submit a claim to HMRC effectively choosing which property the PPR election applies to. However, there is a further proposal to remove the right of a PPR election, so that the availability of the exemption is based on a question of fact rather than choice.

Non-resident individuals owning UK residential properties therefore need to consider whether such properties would qualify for PPR relief before the new rules come into effect.


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