A sweeping new capital gains tax regime for expats is on the way, according to a new consultation published by the British government.
Table of contents
Chancellor George Osborne pledged changes in his Budget 2014, but the full extent of the shake-up remained unclear until the consultation papers were published.
Under the proposals, any expat or non-resident who makes a chargeable gain in Britain after from April 6, 2015, will have to pay capital gains tax (CGT) to bring them in line with the tax paid by resident taxpayers.
It’s likely the start of the 2015-16 tax year will see an extensive rebasing in property values for expats and non-residents to set their CGT clocks to start.
The new rules cover homes and investment property – including second homes, buy to lets, houses in multiple occupation and furnished holiday lets.
What is unclear at the moment is just how much tax they will pay.
Consultation questions
The government is unsure whether to set a CGT rate for expats or to allow them to declare their income and tax them accordingly.
British taxpayers will pay CGT at a rate of 18% if they earn less than £42,865 and at 28% if they earn more. The thresholds are set for review in the next Budget for 2015.
Also out for consultation is whether expats and non-residents will get an annual exempt amount for CGT, which stands at £11,100 from April 6, 2015.
The good news for expats moving abroad and selling their home behind them in Britain is they keep principle private residence relief (PPR), so will not pay CGT on the sale of their home until 18 months after leaving the UK.
Add in the annual exempt amount and home values will have to rise at a significant rate for two or three years after an expat has left the UK before CGT is due.
Withholding tax
HMRC is likely to collect CGT by introducing some sort of withholding arrangement similar to how stamp duty land tax is collected when a property is purchased.
The proposal suggests the tax is deducted from the sale proceeds by the lawyer handling the sale and paid within 30 days.
If the expat or non-resident owner disagrees with the amount of tax due, they can appeal the case direct to HMRC.
The consultation is open to June 2014.
Expats and non-residents can make their views known online at the HMRC consultation web site
Related Articles
Further related articles can be found following the links below