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HMRC Targets Non-Residents in Property Capital Gains Clampdown

IMAGE: Property Capital Gains Clampdown

IMAGE: Property Capital Gains Clampdown

Over recent years the Cambridge property market has been boosted by money from overseas investors. This is no surprise because Cambridge is seen as a good place to invest and the many new developments have been attractive to overseas buyers, but HMRC has had its eye on non-residents as regards property capital gains tax (CGT).  The Finance Bill 2015 received royal assent on 26 March 2015 and included provisions that extend UK CGT to gains made by non-residents on post 5th April 2015 disposals of UK residential property. This now puts the UK on an equal footing with many other countries.

The new property capital gains rules will restrict the circumstances when non-residents will be eligible for PPR (Principal Private Residence) relief. A person’s residence will only be eligible for PPR if it meets one of 2 conditions:

  • either the person making the disposal was tax-resident in the same country as the property for that tax year,
  • or the person spent at least 90 midnights in that property in that tax year. (If a person has multiple properties in a country where they are not tax-resident, they can nominate 1 property for PPR.)

Property values are to be re-based to April 2015, unless the seller opts for time apportionment on the whole gain. Disposals must be reported to HMRC within 30 days, regardless of whether or not the disposal gives rise to a relevant gain. This will be done via a specific non-resident capital gain tax return, now available online.

A non-resident without an existing relationship with HMRC must submit the NRCGT Return and pay the charge at the same time.

A non-resident who is already registered for self assessment can choose to pay the charge at the same time as submitting the Return or can make a payment within the usual self assessment timescales. Reporting and payment of the charge will be made electronically.

Large-scale institutional investors will not be subject to the change. Purpose-built student accommodation will also not be subject to the new regime.

So what effect is this likely to have on the Cambridge property scene?  We may see a rush for non-residents to dispose of property before they face a surprise tax bill.  Richard Hatch of Carter Jonas commented in the Cambridge Evening News Property Post that one effect may be to release some ‘good quality stock’ on to the market. So overall it may have an advantageous effect for selling agents who are still telling us that they have insufficient new stock to sell.

By Denise Green of the Wills, Trusts & Estates team and Helen Murphy, Head of the Residential Conveyancing Team at Cambridge solicitors Barr Ellison. Contact Helen or Denise on 01223 417200.

Disclaimer: While we do all that is possible in terms of ensuring its accuracy, this blog contains general information only. Nothing in these pages constitutes legal advice. You need to consult a suitably qualified lawyer from the firm on any specific legal problem or matter.

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