Disposal of UK residential property by non-UK residents

Are you a non-UK resident with a UK property portfolio or an ex-pat who has kept a foothold in the UK property market?

From 6 April 2015 HM Revenue & Customs (HMRC) introduced a new reporting requirement where a UK residential property is sold by an individual who is not resident for tax purposes in the UK.

Those individuals are required to report the disposal and pay any tax falling due within 30 days of conveyance to HMRC. For example, if conveyance is on the 1 July 2018 the sale must be reported no later than 31 July 2018.

It must be stressed that even where the individual is in Self Assessment for tax purposes, or there is no tax to pay on the sale, the submission is still required within the 30 day period, or penalties will be charged.

What is residential property

Residential property includes properties in the process of being constructed or adapted for use as a residential property and the right to acquire a UK residential property ‘off plan’. It does not include;

• Care or nursing homes;

• Accommodation at schools for pupils;

• Hospitals or hospices.

Student accommodation is not considered residential property for these purposes if it has 15 bedrooms or more, is purpose built for students and occupied for at least 165 days of the year for the purpose of education.

If a property has mixed use it still counts as residential and a reasonable apportionment of the gain or loss must be made.

Calculating the gain

Prior to April 2015 the gain on the sale of a residential property by a non-UK resident was not subject to Capital Gains Tax in the UK. From this date the gain is assessable to tax in the UK, and the chargeable portion must be calculated. There are various options for calculating this amount if the property ownership straddles April 2015, and professional advice should be sought to assess the options.

Penalties for late notification

There is a penalty for missing the 30 day deadline, and once the submission is more than 6 months late the penalties seem particularly harsh, especially where no capital gain arises. The penalties are as follows;

• If you miss the deadline by up to 6 months there is a penalty of £100;

• If you miss the deadline by more than 6 months, a further penalty of £300 or 5% of any tax due, whichever is greater;

• More than 12 months, a further penalty of £300 or 5% of any tax due, whichever is greater.

Interest and penalties may be charged if any non-resident Capital Gains Tax is due within the 30 day period but is not paid on time.

Other points to be aware of

• The Personal Representative is responsible for reporting the disposal for a deceased individual who lived abroad.

• Trustees are responsible for reporting the disposal for non-resident trusts.

• Non resident companies are also caught under the rules.

• Those UK companies who hold property which are caught under the ‘ATED’ rules (Annual Tax on Enveloped Dwellings) are required to report the disposal by 31 January after the chargeable period. Payment of any tax is also due by this date.

Changes for UK resident individuals

There is a proposed change in reporting requirements for UK resident individuals that will require in year reporting and payment following the disposal of residential property. This change is likely to be brought in from 6 April 2020 and will introduce a 30 day reporting window.

If you have sold, or are thinking of selling, any property in the UK or overseas, please don’t hesitate to get in touch with our specialist tax team who can assist with calculating the gain or loss, and discuss the reporting requirements.  Also, please get in touch if advice in respect of your residency position.

Please contact Victoria Dadswell or call 01772 821 021.

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