Irish Owners of UK property now subject to UK Capital Gains Tax on Sale

All foreign owners of UK residential property face a new capital gains tax (CGT) if they sell property in the UK after 6 April 2015. This will have a significant impact for Irish owners of UK property who will now be subject to Capital Gains Tax on sales after the 6th April 2015. The change was announced by George Osborne, UK Chancellor of the Exchequer as he stated “It is not right that those who live in this country pay Capital Gains Tax when they sell a home that is not their main residence, but those who don’t live here do not,” he told the UK parliament as part of his Autumn Statement. “That is unfair, so from April 2015 we will introduce Capital Gains Tax on future gains made by non-residents who sell residential property here in the UK.”

One of the reasons for George Osborne’s decision was the rapid growth in London property prices, which many property experts believe could turn into an investment bubble. The rate of annual growth in London property prices was more than double the UK average in 2013.

What is changing for Irish owners of UK property?

Prior to 6 April 2015, non-UK residents disposing of UK residential property did not normally fall within the scope of Capital Gains Tax. As a result of the changes, the Capital Gains Tax net has been further widened. The rules have become even more complex, depending on the residence and nature of the disposer, as well as the type of asset that is being disposed of. We now have an entirely different set of rules for residential property and commercial property. In essence it does mean that property appreciations in value after the 6th April 2015 will be taxable on the non-resident owner of a UK property.

What does the extended regime apply to?

NRCGT applies to non-residents disposing of a “UK residential property interest”.

This term is defined broadly. It catches land that, at any date on or after 6 April 2015 (or at any date since the disposer acquired it, if later), is/has been suitable for use as a dwelling. This includes land that is in the process of being constructed/adapted as a dwelling. As a new head of charge, it also expressly catches disposals of contracts for an off-plan purchase, if the land to be acquired under the contract is to be constructed/adapted as a dwelling. The grant of an option will also be treated as a disposal.

Furthermore, if a non-resident acquires a dwelling and then converts it to commercial property, a later disposal will nevertheless be within the NRCGT charge.

How is the charge levied?

CGT for non-UK residents will be charged in line with existing UK CGT rates and the annual exempt amount will also be available for individuals. Those taxpayers with an “existing relationship” with HMRC will be able to pay the charge as part of their existing self-assessment process. The tax will only apply to gains made above market values from 5 April 2015, when the new charge comes into force.

An annual exemption of £11,000 for 2014/15 is available to individuals so total gains made in the tax year up to this amount are exempt. Any unused annual exemption is lost and cannot be carried forward or transferred to another person. In 2015/16 the capital gains tax annual exemption rises to £11,100.

Once you have reported the disposal, HMRC will send you an email with a payment reference and details on how to pay.

Request a tax consultation about Capital Gains Tax

If you have a UK property, or other assets, in the UK which you are considering selling, you should seek qualified advice about your best course of action to mitigate any unnecessary Capital Gains Tax bills and to ensure you remain compliant with UK Tax law. All Irish resident property owners selling UK property after the 5th April should seek professional advice on the tax implications of the sale. Please email our tax manager for further information or call +353 (0)23 8841899.