HM Treasury Consultation Document: “Implementing a capital gains tax charge on non-residents”

Written by Arnold Hill on May 7, 2014

Last month the UK coalition government released a consultation document proposing the implementation of a capital gains tax charge on non-residents in respect of sales of UK residential property.  The details of the proposal remain relatively vague and are likely to be amended throughout the consultation and legislation process.  However at this stage the following key points have emerged:

  • Scope: It is currently proposed that the extension of CGT would apply only to gains on residential property. The introduction to the document states: “Going forward, non-residents making gains on UK residential property will be subject to UK CGT in a comparable way to UK residents”.  The intention appears to be for the CGT extension to include non-resident individuals, non-resident companies and indeed other non-resident ownership structures such as trusts and partnerships.


  • Exemptions: Few exemptions are proposed, other than certain types of student halls of residence, care homes and other limited examples of communal accommodation. In particular the consultation document indicates that the wide ranging ATED exemptions for commercial letting and other genuine business activities are not proposed for the CGT extension.


  • Calculation and collection of tax liabilities:  The foreword to the consultation document states that “the charge will apply from April 2015, and only to gains arising from that date”. This appears to indicate that UK residential property owned by non UK residents will need to be valued at the introduction date of this new CGT charge (presumably April 2015), and that these valuations will form the base cost for computing any future profit on sale. This would therefore follow the basis used for the ATED related CGT charge introduced last year. Regarding the rate of tax, the document advises that:  “The rate of tax charged will then mirror the higher and lower rates of tax for UK residents so, on the basis of the current system, non-residents will be charged a rate of 18% or 28% on the gains that they make, depending on the total UK income and gains”.  The consultation document goes on to propose that any tax due would be collected “under a withholding tax mechanism”, with an initial payment made shortly after the transaction followed by a balancing payment once the exact gain has been computed.  Further clarification of these aspects is expected in due course.


Assuming that these proposals are introduced in the form anticipated in the consultation document, they would comprise a significant change to the taxation of non UK resident investors.  The consultation period closes on 20 June, and it is likely that more detailed proposals and draft legislation will follow later in the year.

For further information please contact the relevant partner.