UK Capital Gains Tax and non UK residents (NRCGT)

A new charge of capital gains tax on residential property owned by non-residents (NRCGT) will be imposed from 6 April 2015, but only on gains that arise from 6 April 2015 onwards. The gains attributed to periods before 6 April 2015 will not be subject to NRCGT. Taxpayers, including those subject to NRCGT, will be able to nominate a second home as their main residence for CGT purposes subject to conditions. These conditions will affect both nonresident individuals who own homes in the UK, and UK residents who own homes in other countries.

From 6 April 2015 a home can only be nominated as the main residence for CGT purposes if:

• It is located in the same country in which the taxpayer is resident for tax purposes, or

• The taxpayer spends at least 90 midnights in the property in the tax year (or 90 days spread across all the properties the person owns in the country where the property is located)

Days spent in the property by the taxpayer’s spouse or civil partner count as being occupied by the taxpayer, but days cannot be double counted.

The 90 days of occupation does not have to be a continuous period. Where the property is owned for part of the tax year, the 90-day requirement is reduced proportionately to the part of the year for which the property was owned.

Individuals who are not UK resident for tax purposes will have to meet the 90 day condition in order to nominate a UK home as their main residence.If a non UK resident individual does spend 90 midnights or more in their UK home during a tax year, that period of being in the UK could make them resident in the UK for tax purposes under the Statutory Residence Test (SRT), depending on a number of other factors.

UK residents who want to nominate as their main home a property located outside the UK, where they are not tax resident, will also have to meet the 90 day requirement for that overseas property. This will over-ride any main residence nomination for that home which is already in place for periods from 6 April 2015 onwards.

Currently a taxpayer has to nominate a home as their main residence for CGT purposes within two years of beginning to use a second property as a home. This time-scale for nomination will continued to apply for individuals who are tax resident in the UK, but non-resident individuals will be able to nominate the property at the time they report the sale to HMRC, on a new form: NRCGT.

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