Guidance

HS307 Non-resident Capital Gains on direct and indirect disposals of interest in UK land and property (2023)

Updated 6 April 2024

This helpsheet explains the treatment of certain capital gains but is only an introduction. If you’re in any doubt about your circumstances, you should ask your tax adviser. You can contact HMRC with any queries you have, and we can provide any forms you may need.

This helpsheet is for persons chargeable to capital gains tax such as individuals and trustees who need to report their non-resident capital gains or losses (NRCG) in their Self Assessment (SA) return. This helpsheet will help you to fill in the Capital Gains Tax summary pages of your tax return.

For more detailed information about non-resident capital gains (NRCG), see the NRCG guidance at gov.uk or the Capital Gains manual from CG73920 onwards.

This helpsheet does not apply to companies, as from 6 April 2019 Corporation Tax rather than Capital Gains Tax will be charged on UK property or land gains for all non-resident companies.

This helpsheet is not for persons chargeable to capital gains relating to their activity of carrying on a trade, profession or vocation in the UK through a branch or agency. For details on how these rules work for individuals see the guidance in the Capital Gains manual from CG25500 onwards.

Background

If you are a non-resident who has sold or disposed of UK property or land, then it is likely that you were required to submit a non-residential Capital Gains Tax (NRCGT) return. The timeframe for this is within 30 days of the date of completion, if the completion was before 27 October 2021, or within 60 days where completion was on or after 27 October 2021. Land for these purposes also includes any buildings on the land.

Your Self Assessment (SA) tax return will also need to include your NRCG.

What is chargeable

From 6 April 2015 NRCGT was charged on direct disposals of UK residential property. From 6 April 2019, the scope of the charge was extended to cover all direct disposals of UK property and land, and indirect disposals of UK property or land.

Direct disposal

A direct disposal of UK property or land is where a person sells or disposes of their interest in UK property or land.

Indirect disposal

An indirect disposal occurs when a non-resident person sells or disposes of their interest in an asset that derives 75% or more of its gross value from UK land. You must have at least a 25% interest in that asset for the sale or disposal to be an indirect disposal.

An example of an indirect disposal would be the sale of shares in a UK property rich company. A company is UK property rich if 75% or more of the gross asset value of the company is UK land. If you sell shares in a UK property rich company in which you have an interest of 25% or more, you have made an indirect disposal.

Indirect disposals do not apply when:

• land used in a continuing trade is also disposed of
• two or more companies are sold at the same time by the same investors and the property richness test would not apply if the disposals were taken as one transaction

For further details about indirect disposals see the Capital Gains manual from CG73930.

All subsequent references to disposals in this helpsheet will relate to both direct and indirect disposals on residential and non-residential UK property and land.

UK residential property

UK residential property includes:

• a building used or suitable for use as a dwelling
• properties in the process of being constructed or adapted for use as a dwelling
• the garden or grounds of such a building, including structures on the garden or grounds
• the right to acquire a UK dwelling ‘off plan’

For full details of what UK residential property is see the Capital Gains manual at CG73924.

Non-residential property or land

Non-residential property or land includes:

• commercial property, for example shops or offices
• agricultural land
• forests
• any other land or property which is not suitable for use as a residential property

A ‘mixed use’ property is one that has both residential and non-residential elements. For example, a flat connected to a shop, doctor’s surgery or office.

Who is chargeable

You are within the scope of the charge if you’re a

• non-resident individual
• UK resident individual meeting split year conditions and the disposal is made in the overseas part of the tax year
• personal representative of a non-resident who has died
• non-resident who’s in a partnership
• non-resident trustee

If a property was jointly owned, each owner must tell HMRC about their own gain or loss. Special rules apply if you give a UK property to your spouse, your civil partner, or to charity.

Temporary Non-Residents

If you are within the temporary non-resident rules, the portion of the overall gain on the disposal that is not within the scope of the NRCG rules is likely to be within the scope of the temporary non-residence rules.

For more information about the temporary non-residence rules, go to www.gov.uk and search for ‘HS278’.

If you are not within the temporary non-resident rules, there will not be an additional UK Capital Gains Tax charge for the earlier NRCG disposal when you return to the UK.

Returns needed

Non-resident Capital Gains Tax Return

When you sold or disposed of UK property and land, you should have told HMRC within 60 days of completion, even if

• you had no tax to pay
• you made a loss
• you were registered for Self Assessment (SA)

If you need to complete NRCGT return and have not already done so, you need to do this as soon as possible.

The timeframe for this was within 30 days of the date of completion if the completion was before 27 October 2021, or within 60 days where the completion was on or after 27 October 2021.

As well as submitting your NRCGT return within the specified time frame you also had to pay any non-resident Capital Gains Tax due within the same time period. If you miss the deadline penalties and interest may be due.

Self Assessment Return

By the time you complete your SA return for the year you will have already submitted NRCGT returns.

When filling in the capital gains summary pages on form SA108, you include details about your NRCG on disposals of UK property or land from box 52.1 onwards. Reference numbers for the NRCGT returns submitted in the year should be entered in the additional information section at the end of the SA108 form.

The non-resident capital gains or losses should have already been calculated for your NRCGT return. See the sections below for guidance on how to calculate NRCG and what losses are allowable.

How gains are calculated

When completing your SA return, you will have already calculated the gain or loss from your disposal of UK property or land for your NRCGT return. Further help on how to work out your NRCGT, including information about the costs that you are allowed to claim, can be found on gov.uk.

To calculate your NRCG, you deduct certain costs from your disposal proceeds. The costs that you can deduct are the acquisition cost of the UK property or land, the costs of enhancing the property or land and the incidental costs of making the disposal.

If you directly dispose of a UK residential property that you owned before 6 April 2015, you normally use the market value at 5 April 2015 instead of using the acquisition cost of the property. You only deduct enhancement costs incurred from 5 April 2015.

Example 1: Disposal of UK residential property acquired after 5 April 2015

You dispose of a UK residential property for £100,000. The incidental costs of the disposal are £1,000, making the net disposal proceeds £99,000.

You acquired the property in 2017 for £30,000 and spent £10,000 enhancing it. You deduct both the acquisition cost of £30,000 and the enhancement costs of £10,000 from the net disposal proceeds of £99,000. This gives a gain of £59,000.

Disposal proceeds	£100,000
Incidental disposal costs	£1,000
Net disposal proceeds	£99,000
Acquisition cost	£30,000
Enhancement costs	£10,000
Total cost	£40,000
Gain	£59,000

Example 2: Disposal of UK residential property owned before 5 April 2015

You dispose of a UK residential property for £100,000. The incidental costs of the disposal are £1,000, making the net disposal proceeds £99,000.

You acquired the property in 2012 for £30,000 but the market value at 5 April 2015 was £50,000. You spent £10,000 enhancing the property in 2013, but have not incurred any enhancement costs from 5 April 2015. You cannot deduct any enhancement costs, as no enhancement costs were incurred from 5 April 2015. Only the market value at 5 April 2015 of £50,000 can be deducted from the net disposal proceeds of £99,000. This gives a gain of £49,000.

Disposal proceeds	£100,000
Incidental disposal costs	£1,000
Net disposal proceeds	£99,000
Market Value at 5 April 2015	£50,000
Enhancement costs (incurred from 5 April 2015)	£0
Total cost	£50,000
Gain over period from 5 April 2015 to disposal	£49,000

If you indirectly dispose of UK property or land, or dispose of non-residential UK property or land where you owned the asset before 5 April 2019, the standard approach for calculating your gain is to use the market value at 5 April 2019. Further guidance on this can be found at the CG manual from CG73960.

There are alternative methods for calculating your NRCG, which in limited circumstances may be beneficial to use e.g. in certain loss cases. Details on these alternative computation methods can be found on gov.uk and in the Capital Gains manual from CG73960.

Allowable losses

You must use your non-resident capital losses to reduce gains of the same year on other UK property and land. You carry forward unused losses against UK property and land in later years. These losses should be included in box 52.5 of form SA108.

Non-resident capital losses carried forward can only be used to reduce gains on other UK property and land. You cannot use these losses to reduce other chargeable gains or income.

Similarly, non-resident capital gains can only be reduced by losses that are either within the scope of NRCG or would have been in the scope of NRCG. This means that only losses arising from the direct or indirect disposal of a UK property or land can be set against non-resident capital gains.

Example 3

You made a non-resident capital gain of £50,000 in the tax year 2022 to 2023 and had unused losses to carry forward of £40,000.

Of this £40,000 unused loss, £30,000 arose from a disposal of UK property, and £10,000 arose from a disposal of shares in a trading company. Both loses arose in 2013 when you were resident in the UK, and you made no other disposals until the tax year 2022 to 2023.

Only the £30,000 loss on the direct disposal of UK property would have been in the scope of NRCG and can be set against your £50,000 non-resident capital gain in 2022 to 2023. The £10,000 loss of the disposal of shares in a trading company would not be in the scope of NRCG. Your non-resident capital gain of £50,000 will be reduced by £30,000 losses brought forward to £20,000.

If for an individual the tax year is a split year, NRCG losses that arise in the overseas part of a split year that haven’t been used against NRCG gains from the overseas part of the split year can be set against gains of the UK part of that split year where personal losses can be set off.

For more details on capital losses see the guidance in the Capital Gains manual from CG15800 onwards.

Contact

Online forms, phone numbers and addresses for advice on Self Assessment.