The government is consulting on imposing a capital gains tax (CGT) charge made on gains made by non-residents disposing of UK residential property.

It is proposed that this measure will

Included in the consultation is the proposal to remove the second homes flipping election. This will be removed for both UK and non-UK residents.

The UK, unlike other countries, does not generally charge CGT on disposals by non-residents. In contrast, UK resident individuals are subject to CGT on disposals of any residential property that is not their primary residence, including on the gains made on any residential property they own abroad. The taxation of gains made on residential property that is owned in other ways by UK persons – through trusts, companies and funds – is either subject to UK CGT, or UK corporation tax (CT), depending on the nature of the investment and the structure involved.

What is meant by residential property?

Proposed exclusions

Disposals of multiple dwellings in a single transaction will not be excluded from the CGT charge, unlike treatment in the SDLT regime where a transaction involving six or more separate dwellings is currently treated as a non-residential land transaction, capping the SDLT rate at 4%.

Consultation questions

Question 1: Would an exclusion of communal property from the scope of the new regime result in any unintended consequences?

Question 2: Are there any other types of communal residential property that should be excluded from scope?

Question 3: Are there any particular circumstances where including non-resident partners in scope of the charge might lead to unintended consequences?

Question 4: Are there any particular circumstances where including non-resident trustees in scope of the charge might lead to unintended consequences?

Question 5: Is a genuine diversity of ownership (GDO) test an appropriate way to identify funds that should be excluded from the extended CGT regime, and to ensure that small groups of connected people cannot use offshore fund structures to avoid the charge?

Question 6: Are there any practical difficulties in implementing a GDO test?

Question 7: Is there a need for a further test in addition to a GDO? If so, what would this look like and how would it be policed?

Question 8: What are the likely impacts of charging gains (and allowing losses) incurred on disposals of residential property by non-residential property companies that are not already operating a trade in the UK?

Question 9: Are there other approaches that you believe would be more appropriate to ensure that non-resident property investment and rental companies are subject to UK tax on the gains that they make on disposals of UK residential property?

Question 10: Are there any particular circumstances where changing the PRR election rules might lead to unintended consequences?

Question 11: Which approach out of those set out in paragraph 3.5 do you believe is most suitable to ensure that PRR effectively provides tax relief on a person’s main residence only?

Question 12: Are there any other approaches that you would recommend?

Question 13: Do you believe that solicitors, accountants or others should be responsible for the identification of the seller as non-resident, and the collection of the withholding tax?If not, please set out alternative mechanisms for collection.

Question 14: Are there ways that the withholding tax can be introduced so that it fits easily with other property transactions processes?

Question 15: Do you think that the government should offer the option of paying a withholding tax alongside an option to calculate the actual tax due on any gain made from disposal, within the same time scales as SDLT?

Question 16: Is it reasonable to ask non-residents to use self assessment or a variant form to submit final computations within 30 days? If not, what processes would be preferable?

Links: Implementing a CGT charge on non-residents

Responses should be sent by 20 June by email to: This email address is being protected from spambots. You need JavaScript enabled to view it., with the subject heading "Consultation on non-residents". Alternatively please send responses by post to Alan McGuinness, Specialist Personal Tax, Assets and Residence Policy, HM Revenue and Customs, 100 Parliament Street, London SW1A 2BQ; or to Sarah Adams, Enterprise and Property Tax, 1 Horse Guards Road, London SW1A 2HQ.