Capital Gains Tax

Non-UK Residents and UK Residential Property

Capital gains tax will be charged on gains accruing to non-UK resident persons on disposals of UK residential property made on or after 6 April 2015. This will affect:

  • non-UK resident individuals;
  • non-UK resident trusts;
  • personal representatives of a deceased person who was non-UK resident; and
  • non-UK resident companies controlled by five or fewer persons, except where the company itself, or at least one of the controlling persons, is a ‘qualifying institutional investor’.

It will also affect some UK resident individuals disposing of properties overseas or who spend part of a tax year abroad.

Tax will be due for payment within 30 days of the property being conveyed, unless the person has a current self-assessment record with HMRC, when payment will be at the normal due date for the tax year in which the disposal is made.

In addition, private residence relief (PRR) will be restricted where a property is located in a jurisdiction in which a taxpayer is not resident. In these circumstances, the property will only be capable of being regarded as the person’s main residence for PRR purposes for a tax year where the person meets a 90-day test for time spent in the property over the year.

Entrepreneurs’ Relief on Deferred Gains

Finance Act 2015 will allow gains that are eligible for entrepreneurs’ relief (ER), but which are instead deferred into investments that qualify for the Enterprise Investment Scheme (EIS) or Social Investment Tax Relief (SITR), to remain eligible for ER when the gain is realised. This will benefit qualifying gains on disposals that would be eligible for ER but are deferred into EIS or SITR on or after 3 December 2014.

Entrepreneurs’ Relief for Disposals of Goodwill

Legislation in Finance Bill 2015 will prevent entrepreneurs’ relief from being available on disposals of goodwill on or after 3 December 2014 to a close limited company to which the seller is related. The relief may still be claimed by partners in a firm who do not hold or acquire any stake in the successor company.

Restricting Entrepreneurs’ Relief on Associated Disposals

The rules relating to entrepreneurs’ relief on associated disposals are to be amended. For disposals on or after 18 March 2015, in order to qualify for the relief on a disposal of a privately-owned asset, the claimant must reduce his participation in the business by also disposing of a minimum 5% of the shares of the company carrying on the business, or (where the business is carried on in partnership) of a minimum 5% share in the assets of the partnership carrying on the business.

Entrepreneurs’ Relief, Joint Ventures and Partnerships

Legislation is to be introduced to ensure that those who benefit from entrepreneurs’ relief have a 5% directly-held shareholding in a genuine trading company. For disposals on or after 18 March 2015, the definitions of a ‘trading company’ and ‘the holding company of a trading group’ do not take account of activities carried on by joint venture companies which a company is invested in, or of partnerships of which a company is a member. Therefore a company would need to have a significant trade of its own in order to be considered as a trading company.

Exemption for Certain Wasting Assets

Legislation will be introduced to make it clear that the capital gains tax wasting asset exemption applies only if the person selling the asset has used it as plant in their own business as opposed to its being used as plant in another person’s business. This change will have effect for gains accruing on and after 1 April 2015 for corporation tax purposes and 6 April 2015 for CGT purposes.

Threshold amount for ATED-related Capital Gains Tax

Legislation will be introduced in Finance Bill 2015 to reduce the threshold amount for consideration received on a disposal of residential property, above which an Annual Tax on Enveloped Dwellings (ATED)-related gain may accrue. The threshold will fall from £2m to £1m for disposals on or after 6 April 2015, and then to £500,000 for disposals on or after 6 April 2016.