ATXP6 UK
Syllabus A2. Chargeable gains A2b. The scope of CGT

A2bv. Temporary Absence

Syllabus A2bv)

Conclude on the capital gains tax position of individuals coming to and leaving the UK

Individuals coming to and leaving the UK

Temporary non-residence

If the individual leaves the UK for a period of less than five years and also were UK resident for at least four out of the previous seven tax years, individuals have to pay UK CGT in respect of assets acquired before leaving the UK.

The rules for temporary non-UK residents are:

  1. Any gains made during the tax year of departure – chargeable in that year.

  2. Any gains made in subsequent years – chargeable in the tax year the individual becomes UK resident again. 

    This is only for assets that were sold, which were acquired by the individual before they left the UK.

  3. It does not apply to the disposal of assets acquired after leaving the UK.

  4. This makes it difficult for individuals to avoid UK CGT by selling assets when they are not UK resident (in the period of temporary absence), and then return to the UK.

If a person is overseas for more than 5 years they are exempt from CGT on all disposal of UK located chargeable assets and overseas located chargeable assets, when they sell the assets - even if they become UK resident after the 5 years of being non-resident.

The exception is disposals of UK located residential properties, as UK CGT will be payable on any UK located residential properties.

Illustration

James has always been UK resident. 

He intends to leave the UK on 06/04/2018 and become resident in Barbados.

If he does not like Barbados, he will return to the UK in 4 years. 

What will he pay UK CGT on?

  • Solution

    As he has been UK resident for 4 out of the previous 7 tax years and he will return the UK within 5 years, he will pay UK CGT on:

    1) Any capital assets that he owned before leaving the UK and sold while he was in Barbados.
    2) Any UK residential properties owned.
    3) Any disposals that he makes after returning to the UK.