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Non-residents Holding UK Property
Making the complex simple
Generally speaking, non-residents are not chargeable to UK capital gains tax but there are a number of exemptions to this rule and one of those relates to UK property. Disposals of UK property are subject to UK capital gains tax regardless of the residency position of the owner of that property.
If you are disposing of a UK property (residential or non-residential), you must report the transaction and pay any tax due within 30 days of the disposal, as well as reporting that on your annual self -assessment tax return.
Non-resident companies will likewise need to pay corporation tax on gains from UK land and property disposals and report them on their corporation tax return.
Finally, trustees of non-UK resident trusts that make a disposal may become liable to pay non-resident capital gains tax. Even if the trust does not need to register with HMRC and there’s no tax to pay you must still report the disposal.
Penalties and interest will be levied for late payment and submission so if you require assistance in any of these circumstances, please do get in touch and we will be able to assist with your filing obligations.
We have set out below some other things that non-resident property owners should consider.
Annual Tax on Enveloped Dwellings (ATED)
It is a common misconception that ATED only applies to non-UK residents. This is not the case, but it does also apply to non-residents. ATED applies where ‘non-natural persons’ (usually companies) own UK residential property with a value in excess of £500,000. A number of reliefs may be available, particularly where those properties are let on a commercial basis, but this does not mean that an ATED return does not need to be filed and advice should be sought if in any doubt.
In the context of the UK, the NRL scheme applies to individuals who are not resident in the UK but own and rent out properties there. Under this scheme, non-resident landlords are required to register with the UK tax authorities, known as HM Revenue and Customs (HMRC), and comply with certain tax obligations.
Non-resident landlord scheme (NRLS)
The NRL scheme applies to individuals who are not resident in the UK but own and rent out properties there. Under this scheme, non-resident landlords are required to register with HMRC, and comply with certain tax obligations. They must do so before they start renting out their UK properties. Tenants or letting agents who collect rent on behalf of non-resident landlords are then required to deduct basic rate income tax from the rental income before passing it on to the landlord, although non-resident landlords can apply for an exemption from the requirement for rent to be deducted at the source, in which case the landlord will be responsible for reporting and paying tax directly to HMRC.
IHT considerations
UK IHT will still apply if the individual is domiciled (or deemed domiciled) in the UK. Nevertheless there are a number of inheritance tax planning opportunities for non-residents to consider which may reduce their IHT liability.
Double taxation
Both UK and overseas tax could become due where income arises in one jurisdiction and the individual is resident in another, or where an individual is a dual resident. If there is a double tax treaty in place between the two countries, this can be used to prevent double taxation from occurring.