It is one of those strange quirks of the tax system that no capital gains tax has historically been levied on non-resident landlords owning property in the UK, but that is all set to change.
This is an area that has been on the radar for a while and a consultation paper was issued in March 2014 the contents of which are likely to adopted with little if any change. From April 2015 therefore non-resident landlords will be subject to a 28% CGT charge on gains in values of properties in UK, and this will particularly affect London where there are a significant number of overseas purchasers of higher value properties. The key points are as follows:
- Capital gains tax will be charged for sales after 6 April 2015
- The rate of tax will be 28%, the same rate as is charged for higher rate UK taxpayers
- There will be a re-basing of values at 6 April 2015, so valuations will be required at that date for later sales
- It is expected to be limited to sales over £500k, no doubt with avoidance measures to stop manipulation of the sales price
- It will apply not only to individuals but also to other entities including companies and partnerships
- The selling solicitor is expected to have to account to HMRC for a withholding tax based on the sales value, subject to completion of a UK tax return.
This information is based on the consultation document and while it is expected to be adopted in full, this may change before it is made law so you should take professional advice before taking action based on the contents of this article. If you would like advice in this or other areas feel free to call. Alastair Wood, AW Accounting, Gravesend, Kent – Accountants who “speak your language”