Press releases

Capital gains tax (CGT) charge on UK residential property to non UK-residents

28 November 2014

Patricia Mock, Deloitte tax director, comments on the Government’s response to the Consultation into extending the capital gains tax (CGT) charge on UK residential property to non UK-residents which was published last night: “The document published yesterday confirms that the new capital gains tax charge on non-residents disposing of UK residential property will start on 6 April 2015. Properties will be revalued to market value at 5 April 2015 with an election for time apportionment or original cost – so initially the new charge will raise very little as it will tax only the growth in the value of the property from April 2015.

“The government has come up with a neat answer to the problem of allowing taxpayers to elect which of two residences should be exempt from capital gains tax. The original plan to abolish the election entirely would have been unfair to UK residents, as well as administratively complex for HMRC and taxpayers. New rules will be introduced for those who have a property in a different country from their country of residence and these individuals will need to stay at the property for at least 90 days a year to get the exemption. This will apply to UK residents with homes abroad as well as to non-residents with homes in the UK.”

The detail

Under the current rules it is possible for an individual with more than one residence to elect which he would like to be treated as his main residence for the purpose of the Principal Private Residence relief (PPR). A non-UK resident individual who has a home in the UK and a home abroad could therefore elect for the UK home to be treated as the main residence. This would prevent a CGT charge on the UK home and the home abroad would be outside the scope of CGT, thus undermining the new charge.

Accordingly, the original consultation considered abolishing PRR elections and either determining which property should be treated as the main residence based on the balance of facts, taking into account factors such as the location of the individual’s work and family, or introducing an entirely new objective test, possibly based on days of presence at each of the properties.

The proposals would also have affected UK resident individuals, meaning not only increased tax bills in some cases but also considerable additional complexity in establishing which of two properties should be treated as the exempt residence.

The response document makes clear that neither of these two new approaches is being adopted.

Instead, the availability of PPR relief will be restricted. From April 2015 an individual’s residence will not be eligible for relief for a tax year unless either:

  • The individual making the disposal was tax resident in the same country as the property for that tax year, or
  • The individual spent at least 90 midnights at that property in that tax year. Occupation by the individual’s spouse or civil partner will count towards this total.

Therefore for UK residents whose residences are only in the UK, the current position appears to have largely been preserved, although the Government response is not explicit that elections will still be able to be made.

However, where the residence is not in the same jurisdiction as the taxpayer, the taxpayer will need to satisfy the 90 day rule in respect of the overseas home or he will be regarded as absent from the property for that tax year and it will not attract relief for that year. This will affect both UK resident taxpayers who have a property overseas which they have elected to be their exempt residence and non-UK residents who own a property in the UK.

This is a new requirement for UK resident taxpayers and they will need to consider carefully whether their visits to an overseas property are sufficient in each tax year to ensure relief. If this is not the case, varying the election to a property where the requirements are satisfied might be appropriate, assuming that this opportunity continues to exist. Overseas tax may also need to be considered.

For non-UK residents who own a residence in the UK, satisfying the 90 day test for the UK property may have wider consequences with regard to residence status, as the number of days spent in the UK are a key test for residence.

The response document notes that non-residents will be allowed to make PRR elections at the time of disposal. Any tax years in which the 90 day rule was met, including those prior to April 2015, will be taken into account when determining whether the property should attract relief. It is not clear whether the timing of elections will change for UK residents, or whether the current rule, requiring an election to be made within two years of moving into a second or subsequent residence will remain. The impact individuals who change their residence status during the time they own the residence is also unclear.

Further guidance is promised and draft legislation is to be issued on 10 December in the draft Finance Bill.


Notes to editors

About Deloitte

In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.

Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see for a detailed description of the legal structure of DTTL and its member firms.

The information contained in this press release is correct at the time of going to press.

Member of Deloitte Touche Tohmatsu Limited.

Laura Parsons
Deloitte LLP
+44 (0) 20 7303 0885

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