The UK tax man is calling on expat married couples to stop filing capital gains tax return when they switch shares in properties they own.
HM Revenue and Customs (HMRC) is concerned married couples do not understand the CGT rules for non-residents and are wrongly filing tax returns.
The rules for non-residents owning residential property in the UK changed in April 2015.
One of the cases when a couple do not need to file a tax return is when they dispose of a share in a home to a spouse.
Special rules for couples
Special ‘no gain/no loss’ rules apply to property disposals between non-resident expat spouses.
Providing they keep a record of the change of ownership, no tax is due on the disposal and no CGT return should be filed.
However, online guidance posted by HMRC does not make this clear, so couples are filing returns within 30 days of the transaction to make sure they have no liability for CGT.
“A non-resident that disposes of a UK residential property is normally required to deliver to HMRC a return within 30 days of the disposal being completed. This includes where there is no tax to pay or the disposal is for a loss. Penalties can apply where a return is delivered late,” says HMRC in a bulletin to tax agents.
No gain, no loss deals
“The Finance Act 2016 provided, retrospectively to the beginning of NRCGT in April 2015, two circumstances when an NRCGT return need not be delivered. One of those is where the disposal is covered by the CGT ‘no gain/no loss provisions’, such as a disposal to a spouse.
“HMRC is seeing many cases where it is mistakenly claimed that this provision applies in any case where the computation results in either no gain or a loss, such because of market values or allowable deductions. This is not the case and care should be taken to ensure that returns are delivered on time.”
The HMRC online non-resident CGT guidance explains who should file a tax return, but does not mention ‘no gain/no loss’ transactions between spouses.
The procedure allows couple to organise their savings and investments in a way that they can pay the least tax.