Round the houses – again…..
In my comment of 27 March we had a brief look at the changes to capital gains tax expected shortly. The consultation document, on the implementation of CGT for non residents owning UK residential property, has now been issued and makes interesting reading.
There are various options put forward but the key points are that the taxable gain is likely to be the sum arising after April 2015, so the impact will be limited for a while until those numbers become significant. It looks most likely that there will be a withholding by the conveyancer, which is not unlike the French system. There will be limited exceptions but these will not include let property which is different from the annual tax on enveloped dwellings (ATED) regime. The other key point is that the interaction with this tax and the existing charges for non residents (either through ATED or anti avoidance rules for trusts and companies) is very complicated and we will need to examine the legislation when it comes out carefully.
One issue which we had wondered about was how and whether main residence relief would interact with this new charge. Not unexpectedly, HMRC is concerned that this relief is open to abuse and would like to limit its application to non residents. That may be fair enough but worryingly the con doc suggests that the ability to elect for main residence relief at all could be withdrawn; regardless of UK residence status. Rather it is proposed that the question would be determined as a matter of fact. It is not hard to see this clogging up the Tribunals for a good long while.
We will be responding to the consultation document via the ICAEW but in the meantime, if you are considering making or varying a main residence election you may wish to do so sooner rather than later and before December 2014 which is the earliest likely date for a change. You may also want to consider what evidence you have that a property is your main residence and finally, if there could be an unanticipated charge to CGT, dig out the invoices for any improvement expenditure so that you do not pay unnecessary tax.
This is all very early stages as yet and we will keep you up to date with developments.
Date: 8th April, 2014
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