British tax on capital gains for non-residents

Introduction

Non -residents, companies and trusts with British goods or land may be subject to the tax on British capital gains (CGT) or corporate tax (CT) on gains made.

Understanding these tax rules is essential to ensure that you are in accordance and capable of effectively managing all potential responsibilities.

Changes in tax rules on British capital gains for non-residents

April 6, 2015 – Introduction of CGT for non -residents

Since April 6, 2015, individuals, businesses and non-residents have been required to pay the British CGT on the gains of the sale of residential property in the United Kingdom. To facilitate the transition, the British government allowed owners to restore the cost of their property at its market value on this date. This ensures that the gains made after April 6, 2015 would be taxable.

April 6, 2019 – Expansion of commercial goods and “indirect” eliminations

On April 6, 2019, the scope of the CGT was extended to include all Land and British property, including commercial properties. In addition, tax responsibilities were introduced for “indirect” transfers (discussed below).

The non-residents who had goods or land before this date could reprimand the value at its market price on April 6, 2019, ensuring that only the gains made thereafter were taxable. In some cases, rebasing can be casual, especially if it leads to a global capital loss.

Direct provisions vs indirect

Direct elimination occurs when a non-resident sells a British property or the land they have.

On the other hand, an indirect elimination applies when a non-resident sells an interest in an asset, such as a company, which derives at least 75% of its gross asset value of the British property. This rule aims to prevent tax evasion by using corporate structures such as Companies rich in British property.

For an indirect elimination to be taxable, two key conditions must be met:

– the actions (or interest) sold must be in a company / an asset which is’goodsmeaning At least 75% of its total asset (per gross value) consist of British property. No deduction for liabilities or debts is authorized when calculating the 75%test.

– the seller (which may include all connected parts) must have held At least 25% interest in the company / active At the time of elimination or at any time in the previous two years.

If these conditions are met, any gain made available will be taxable in the United Kingdom.

And the groups?

If a company indirectly has British goods through a subsidiary, it can always be classified as properties. It means that Sell ​​shares in the parent company (Even if it does not have the property directly) can always trigger a tax burden in the United Kingdom.

For example:

• A non-resident has actions in a holding company.
• The portfolio company has a subsidiary holding a British property.
• If British property of the subsidiary represents more than 75% of the total value of the group’s gross asset, the whole group is considered rich in properties.
• If the non-resident sells its actions in the Holding company, it can be responsible for the British tax on the gain.

Exemptions from these rules

Certain exemptions apply to these tax rules. For example, elimination may not be taxable if British property is actively used for an eligible British trade, such as a hotel or a care house, and has been operated for at least one year in the intention of continuing.

In addition, if linked elimination occurs at the same time, it can reduce the percentage of the interest of the property below the threshold of 75%.

Report and payment demarcas

Non-resident and trustee people must produce a non-resident CGT declaration within 60 days of completion and also report the elimination of their self-evaluation income declaration. N

Resident companies must register within three months of elimination, submit a tax return from British companies within 12 months and pay the tax in the nine months and one day after the end of their accounting period.

Final reflections

Understanding the United Kingdom’s tax rules on land provisions is crucial for non-residents in order to avoid unexpected responsibilities. Since the tax implications can be complex, the search for professional advice is recommended to guarantee compliance and optimize tax efficiency.

If you have any questions about the above or if you want to discuss your position, do not hesitate to contact us today.