What’s the latest on reporting capital gains for non-residents?

Since 5 April 2015, non-UK resident individuals have been chargeable to Non-Resident Capital Gains Tax (NRCGT) on the disposal of UK-situated residential property. New regulations have introduced new reporting requirements on UK property disposals, even when there is no Capital Gains Tax payable.
Only the increase in the value of the property from 6 April 2015 is chargeable to NRCGT. The Capital Gains Tax (CGT) annual exemption, which currently stands at £11,300, may be available to set against the gain in property value before it is charged at tax rates of 18% or 28%.

Disposals of property can include transfers and gifts as well as sales, so NRCGT can be charged on a disposal even if you do not receive any proceeds from the transaction.

The new regulations

The new regulations require non-residents to report the disposal of any UK residential properties to HMRC within 30 days of the disposal date, via a new online return. The return is required even if there is no CGT payable.

If the non-resident individual is not registered with HMRC, the online return must include a computation of the tax charge arising on the disposal. The deadline for payment of the tax is the same 30 days from the date of disposal.

Where the individual is registered with HMRC, the return only needs to show that the computation, and payment of the tax, will be included in their normal UK tax return. The CGT charge will then be payable on the 31 January following the tax year of the disposal (i.e. 31 January 2019 for disposals made during the year to 5 April 2018).

What are the penalties for non-compliance?

Penalties for late NRCGT returns are being enforced by HMRC as a matter of course and according to the following scale:
  • up to 6 months, you will get a penalty of £100
  • 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
Late payment penalties and interest charges will also be added if the deadline is missed.

It is worth noting, however, that HMRC have recently lost a couple of cases where non-resident individuals appealed against late-filing penalties. These cases may reduce HMRC’s insistence on charging penalties in all cases and may further encourage taxpayers to appeal against any penalties especially when no tax is due.

If you are considering the disposal of a UK residential property, please let your Buzzacott contact know as soon as possible so that we can advise you of the potential tax consequences and reporting requirements.

This article was taken from the Winter 2017 issue of the Private Client team's Quarterly Tax Digest. You can access all the other articles here.

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