Chancellor George Osborne has laid out a blueprint for the biggest capital gains tax shake-up ever for expats and other non-residents owning homes in Britain.
Current rules allow home owners living abroad permanently to sell up without paying CGT, but that is to end from April 2015.
From then, new laws will bring non-resident and expat home owners in line with the CGT rules for British taxpayers.
The 2015-2016 tax year will start with a massive rebasing of home prices as thousands of owners living offshore start calculating their gains.
Osborne is not sure yet how much tax they will pay or how to collect the money, so has a list of questions out to property professionals and home owners to find their views.
What he does expect is:
- Offshore and onshore home owners will pay the same rates of CGT
- Expats and non-residents will qualify for the CGT annual allowance ‘ which will be £11,100 from April 2015.
- Expats will also pick up principle private residence relief (PPR) if the property sold was their main home, including the 18-month grace period to sell the home before CGT is charged
- The rules will apply to companies, trusts and other ownership structures, not just individuals
The proposal suggests lawyers handling a sale with withhold CGT at the top rate (28%) after reliefs and the annual allowance are deducted.
The seller would then have to prove their income to HMRC to gain a refund down to the lower rate of CGT (18%).
All residential property is covered by the capital gains overhaul ‘ including second homes, buy to lets, houses in multiple occupation (HMOs) and furnished holiday lets.
?The government does not believe that it is right that UK residents pay capital gains tax when they sell a home that is not their primary residence, while non-residents do not,’ said David Gauke, Exchequer Secretary to the Treasury.
?Similarly, we do not believe that it is right that UK companies are subject to tax on gains that they make from disposals of residential property, whereas non-residents are not. It is important for the integrity of our tax system that when gains are made from UK residential property, UK tax is paid.?
The CGT for non-residents consultation is open to June 2014.
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Article courtesy of LandlordZONE””
