UK CGT For Non-Resident Property Sales

[davejones]

Any UK expats that have UK property they might sell one day might be interested in a DM article that says the government are planning to introduce CGT on property sales by non-residents. This could affect lots of Brits here.

http://www.dailymail.co.uk/money/mortgageshome/article-2480898/Osborne-mulls-capital-gains-tax-foreign-homeowners.html

[AyG]

I doubt it will be quite as draconian as it sounds. It will almost certainly only apply to second homes, thus being in line with the European norm for property taxation.

[davejones]

I doubt it will be quite as draconian as it sounds. It will almost certainly only apply to second homes, thus being in line with the European norm for property taxation.

For expats here, their UK property will be their 2nd home, as it's most likely rented out. Especially those that are non-resident for tax. Or for those that have a few rental properties there.

[AyG]

I doubt it will be quite as draconian as it sounds. It will almost certainly only apply to second homes, thus being in line with the European norm for property taxation.

For expats here, their UK property will be their 2nd home, as it's most likely rented out. Especially those that are non-resident for tax. Or for those that have a few rental properties there.

If a property is rented out then capital gains tax may already be payable. (In other words, the property isn't eligible for Private Residence Relief.) However, the first GBP 40,000 of gains are tax-exempt (Letting Relief). It's possible that the Chancellor is considering taking away this relief for non-residents.

The Financial Times has a much better article than the Daily Mail (no surprise there). http://www.ft.com/intl/cms/s/0/488bdbf6-4237-11e3-bb85-00144feabdc0.html

From the FT, it does appear that the target is wealthy foreigners with multiple properties. However, the FT also suggests that such a change in taxation law would be impractical. (How do you make a non-resident pay UK tax?)

[davejones]

I doubt it will be quite as draconian as it sounds. It will almost certainly only apply to second homes, thus being in line with the European norm for property taxation.

For expats here, their UK property will be their 2nd home, as it's most likely rented out. Especially those that are non-resident for tax. Or for those that have a few rental properties there.

If a property is rented out then capital gains tax may already be payable. (In other words, the property isn't eligible for Private Residence Relief.) However, the first GBP 40,000 of gains are tax-exempt (Letting Relief). It's possible that the Chancellor is considering taking away this relief for non-residents.

The Financial Times has a much better article than the Daily Mail (no surprise there). http://www.ft.com/intl/cms/s/0/488bdbf6-4237-11e3-bb85-00144feabdc0.html

From the FT, it does appear that the target is wealthy foreigners with multiple properties. However, the FT also suggests that such a change in taxation law would be impractical. (How do you make a non-resident pay UK tax?)

Non-residents do not currently have to pay UK CGT. This applies to non-UK citizens, and also UK citizens living overseas that have non-resident tax status in the UK.

How do you make a non-resident pay tax? A number for ways, the most popular of which is to not allow them into the country unless they have paid all their tax. Or make lawyers deduct the tax at sales time. They could even order the property to be sold to cover unpaid taxes. Plenty of ways. As far as I'm aware (although I might be wrong), Private Residence Relief is for UK residents not non-residents.

[GavinK]

Wouldn't this be an incentive for foreign owners NOT to sell their property thereby reducing the supply and increasing the market prices further ?

[davejones]

Wouldn't this be an incentive for foreign owners NOT to sell their property thereby reducing the supply and increasing the market prices further ?

In the short term probably it will stop people selling, but they'll have to sell in the end. Also, the tax could be quite low for many people so they don't really care.

[icare999]

if your non resident or want benefit of being non resident you don't live in UK so I think you are not entitled to any first home allowance. To be non domiciled you actually should not have any home for your own use in UK. One reason I became non resident was to save CGT on my property investments in the UK. If they introduce CGT on property for non residents I certainly would consider selling whatI have left before such a law was introduced.

I trust if the UK are going to do this the least they could do is give increases to non residents UK pensions instead of freezing them.

Their are all sorts of ways around this I can see without even trying not least being selling ones property to a wife or child at high price before any such new tax and then buying it back after the new tax. Of course if property was over stamp duty allowance this could be costly.

[icare999]

I doubt it will be quite as draconian as it sounds. It will almost certainly only apply to second homes, thus being in line with the European norm for property taxation.

For expats here, their UK property will be their 2nd home, as it's most likely rented out. Especially those that are non-resident for tax. Or for those that have a few rental properties there.

If a property is rented out then capital gains tax may already be payable. (In other words, the property isn't eligible for Private Residence Relief.) However, the first GBP 40,000 of gains are tax-exempt (Letting Relief). It's possible that the Chancellor is considering taking away this relief for non-residents.

The Financial Times has a much better article than the Daily Mail (no surprise there). http://www.ft.com/intl/cms/s/0/488bdbf6-4237-11e3-bb85-00144feabdc0.html

From the FT, it does appear that the target is wealthy foreigners with multiple properties. However, the FT also suggests that such a change in taxation law would be impractical. (How do you make a non-resident pay UK tax?)

utter nonsense non residents do not need to pay CGT tax on property or shares period and its nothing to do with being a mina residence In fact non residents are not really allowed a main residence in Uk or that would make them residents and not given CGT exception

[Baerboxer]

I doubt it will be quite as draconian as it sounds. It will almost certainly only apply to second homes, thus being in line with the European norm for property taxation.

For expats here, their UK property will be their 2nd home, as it's most likely rented out. Especially those that are non-resident for tax. Or for those that have a few rental properties there.

If a property is rented out then capital gains tax may already be payable. (In other words, the property isn't eligible for Private Residence Relief.) However, the first GBP 40,000 of gains are tax-exempt (Letting Relief). It's possible that the Chancellor is considering taking away this relief for non-residents.

The Financial Times has a much better article than the Daily Mail (no surprise there). http://www.ft.com/intl/cms/s/0/488bdbf6-4237-11e3-bb85-00144feabdc0.html

From the FT, it does appear that the target is wealthy foreigners with multiple properties. However, the FT also suggests that such a change in taxation law would be impractical. (How do you make a non-resident pay UK tax?)

Interesting FT article - thank you for the link. Lots of speculation so will have to wait and see if Osborne announces anything in December. The sensible thing would be to implement the mansion tax advocated by the liberal coalition partners and Labour. Cameron is worried this might upset his party's supporters and donors - typical. It seems the real target is foreign investors making property investments in the expensive London areas. Let's hope some sense prevails rather then arriving at the usual politically biased abortion the becomes a dog's breakfast to understand and a minefield for those of us with one small property.

[davejones]

The problem with the mansion tax is that there are still quite a few poor people who are living in expensive houses. They bought when property was cheap and the areas were a slum. They have lived there all their lives. They are still relatively poor even though their properties are now very expensive. They want to stay in the areas they were born and have lived all their lives. Why do you you think they should be forced out by a huge mansion tax that they can't afford. They worked had, did nothing wrong, but because the area become rich you think they should be force out by a high tax policy. A mansion tax means that only the rich will be able to afford t live there and all others will be forced out. The mansion tax is a ridiculous idea. Not thought through at all.

[davejones]

if your non resident or want benefit of being non resident you don't live in UK so I think you are not entitled to any first home allowance. To be non domiciled you actually should not have any home for your own use in UK. One reason I became non resident was to save CGT on my property investments in the UK. If they introduce CGT on property for non residents I certainly would consider selling whatI have left before such a law was introduced.

I trust if the UK are going to do this the least they could do is give increases to non residents UK pensions instead of freezing them.

Their are all sorts of ways around this I can see without even trying not least being selling ones property to a wife or child at high price before any such new tax and then buying it back after the new tax. Of course if property was over stamp duty allowance this could be costly.

If they introduce such a law I doubt you would time to sell. It would probably come in instantly.

I think the government are aiming at non-Brits, but the Brit non-residents will get caught up in it.

In case you don't know being non-resident and being non-domiciled are completely different things. Of course non-domiciled people should have a home, as they can't live on the streets. I'm non-resident for UK tax purposes but it's still by domicile (which is very hard indeed to change). You're saying that all the ex-pats in Thailand shouldn't be allowed to own a home here because they're not domiciled here.

I wouldn't be surprised if ex-pats eventually don't get a UK pension at all - unless their in EU or a few other countries. I think we need a few people to take some cases to court to test the law, as the UK government is discriminating against people based on what country they choose to live in. So, in effect, their are trying to curtail freedom of movement.

[GavinK]

They could soften the blow by increasing the tax free allowance on CGT to non-resident UK doms. Or just apply CGT to non-resident-non-UK doms. Probably unlikely...

Govt needs cash now. Quickest way would be to increase stamp duty on purchases and cut schemes to avoid stamp duty.

[AyG]

And so it came to pass:

http://www.citywire.co.uk/wealth-manager/autumn-statement-cgt-imposed-on-foreigners-selling-uk-homes/a722883?re=26601&ea=299937&utm_source=BulkEmail_WM_Daily&utm_medium=BulkEmail_WM_Daily&utm_campaign=BulkEmail_WM_Daily

[Jip99]

And so it came to pass:

http://www.citywire.co.uk/wealth-manager/autumn-statement-cgt-imposed-on-foreigners-selling-uk-homes/a722883?re=26601&ea=299937&utm_source=BulkEmail_WM_Daily&utm_medium=BulkEmail_WM_Daily&utm_campaign=BulkEmail_WM_Daily

No worries, not relevant to this thread - I am not a foreigner.

Foreigner = a person born in or coming from a country other than one's own.

Non-resident = not living or based in a particular place.

[davejones]

According to the Guardian newspaper, this applies to expats as well. They say...

The rule change, which comes into effect in April 2015, will apply to future increases in value, not any previous growth. As well as foreign investors it will also hit UK expats selling properties while based overseas, and is expected to earn the government £125m by 2018/19.

See http://www.theguardian.com/money/2013/dec/05/autumn-statement-overseas-property-tax-loophole-cgt.

But it only applies to gains made after April 2015. I have no idea how they will work out the value if it's sold years later. E.g. you sell in 2025, so what was it worth in April 2015? I suppose they can only base it on similar sales in the area. Maybe an idea to get some valuations in April 2015 and keep for proof of value. No CGT on gains already made though, or on gains made up to April 2015.

[GavinK]

At least he gives some notice so that 'those wealthy foreigners' can look for other loopholes to see if it can still be avoided...

[davejones]

At least he gives some notice so that 'those wealthy foreigners' can look for other loopholes to see if it can still be avoided...

It's odd that it's so far in advance, but I think implementation will be tricky, which is why it's probably so far ahead.