ACCA ATX ^UK Syllabus A2. Chargeable gains - UK Located Land and Buildings - Notes ^{5 / 6}

Normally

UK CGT is only payable by UK residents. 
However, from 6 April 2019, there is an exception to this.

Non UK residents selling:

• UK land and buildings (residential and non-residential);

• UK assets used in a trade based in the UK

   will pay UK CGT on the disposals.

These rules apply to both individuals and companies although in ATX the rules that apply to companies will only be relevant in the following circumstances:

• Where a non-resident company disposes of a UK property used by a UK permanent establishment;

• Where entities that derive at least 75% of their value from UK property and the person making the disposal has a substantial interest (25% or more) in the entity holding the property.

Where the property was acquired prior to 6 April 2019 the amount that will be within the scope of CGT will be either:

• the gain/loss arrived at by deducting the market value of the property as at 5 April 2019 from the sale proceeds, or

• the whole of the gain calculated in the normal way. This alternative method requires an election.

Note

If the disposal is of a business asset, rollover relief may be available if the replacement asset is UK land/buildings.

Gift relief is also available despite the individual being non-UK resident and regardless of the residence status of the donee.

The non-resident individual must submit a non-resident CGT return to HMRC within 30 days of completion regardless of whether or not there is a taxable gain (eg where chargeable gain is covered by the annual exemption).

Note: non-resident individuals are entitled to the annual exemption.

Note: In the ATX exam:

1. UK land sold by a non-UK resident will always be acquired after 5 April 2015 (the date when disposals of UK property by non-UK resident individuals became taxable).

2. Properties will be either wholly residential or wholly non-residential throughout the period of ownership.

As a result of these restrictions, for disposals by non-UK residents of:

• residential properties, the gain will be calculated in the normal way;

• non-residential properties owned on 5 April 2019, the gain will be calculated by reference to the market value as at 5 April 2019, or in the normal way (by election);

• other non-residential properties, the gain will be calculated in the normal way.

Illustration:

Jake was not UK resident in 05/04/25 but sold a non-residential property for £300,000 during the tax year. 

He originally purchased it for £150,000 on 05/04/17 and at 05/04/19 it had a market value of £200,000.

What capital gain will arise on this sale?

Solution:

Method one:

• Sale proceeds £300,000

  Less MV at 05/04/19 (£200,000)

  Capital gain £100,000

Method two (by election):

• Sale proceeds £300,000

  Less cost (£150,000)

  Gain £150,000

• Jake should not elect for NORMAL method. 
  One should be chosen to calculate the capital gain.