Non-resident Capital Gains Tax (NRCGT)

If you are a non-UK resident individual or company and you dispose of land or property that is situated in the UK, you could be subject to NRCGT and are likely to have reporting obligations.

NRCGT for Individuals

Where a non-UK resident individual disposes of UK property (or of shares in a "property rich company") after 27 October 2021, they need to report and pay NRCGT within 60 days (30 days for disposals between 6 April 2020 and 26 October 2021).

NRCGT applies to disposals of UK land and property whether it be for residential or non-residential use. It is still necessary to report the disposal where there is no tax to pay or you have made a loss.

Indirect Disposals

As well as applying to direct disposals, NRCGT also applies where an individual disposes of shares in a property rich company. A company is property rich where it derives at least 75% of its value from UK property. There are some exemptions available on indirect disposals and we would be happy to discuss whether these might be available in your circumstances.

How Much NRCGT Will I Pay And When Will It Be Due?

Where you are disposing of non-residential property or of shares in a property rich company, you will pay 10% or 20% on the gain depending on your other income and gains in the tax year. Direct disposals of residential property are charged at higher rates, currently 18% or 28%. Broadly the gain is calculated as sale proceeds less the original cost of the property (or shares), certain costs of improvements and professional fees . However, depending on when the land and property was purchased, the original cost may be rebased as follows:

- To the value of the property on 6 April 2015 for residential property purchased before this date
- To the value of the property on 6 April 2019 for non-residential property purchased before this date
- To the value of the shares on 6 April 2019 for shares in property rich companies purchased before this date

Where NRCGT is due, it should be paid within 60 days of the disposal.

NRCGT for Companies

Non-UK resident companies pay corporation tax on disposals of UK land and property rather than NRCGT. This is applicable regardless of whether the property is residential or non-residential.

Indirect disposals

As well as direct disposals of UK land and property, non-resident companies are subject to corporation tax on the disposal of shares in a property rich company. A company is property rich where it derives at least 75% of its value from UK property. There are some exemptions available on indirect disposals however and we would be happy to discuss whether these might be available in your circumstances.

Reporting requirements for non-resident companies

The reporting and payment timetable for companies is more relaxed than for individuals. A non-resident company should register for corporation tax within 3 months of the disposal.

Where the company is only disposing of one property (or shares in one property rich company), it should make payment of any corporation tax due within 3 months and 14 days of the disposal. Further to that, the company should make a corporation tax return within 12 months of the disposal which should include computations of the gain/(loss) and any corporation tax payable.

Example: reporting and payment timeline for the disposal of a property or shares in a property rich company

Company A makes a direct or indirect disposal of land on 1 July 2022. The key reporting and payment dates are as follows:

- Register for corporation tax before 1 October 2022
- Pay any corporation tax due on the disposal by 15 October 2022
- File a corporation tax return by 30 June 2023

How much corporation tax will be payable?

A non-resident UK company will pay the prevailing rate of corporation tax on any relevant gains. Broadly the gain is calculated as sale proceeds less the original cost of the property (or shares), certain costs of improvements and professional fees . However, depending on when the land and property was purchased, the original cost may be rebased as follows:

- To the value of the property on 6 April 2015 for residential property purchased before this date
- To the value of the property on 6 April 2019 for non-residential property purchased before this date
- To the value of the shares on 6 April 2019 for shares in property rich companies purchased before this date

If you would like to discuss any aspect of the NRCGT regime, please feel free get in touch. Whether you are planning to dispose of a UK property or have already done so, we can provide expert advice.

 

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