CG26810 - Capital Gains manual: individuals: effects of residence and domicile for departures on or after 6 April 2013 and general rules from 6 April 2013: Arrival in and departure from UK: temporary non-residence: interaction with NRCGT
TCGA92/S2(7A)*
A disposal of an interest in UK residential property by an individual in a year of non-UK residence or the overseas part of a split year is caught by the charge to NRCGT**. Guidance on NRCGT** is from CG73700 onwards and applies for disposals to 5 April 2019.
Where the disposal is also within the scope of TCGA92/S10A* an adjustment is required to ensure that a double charge does not arise on the NRCGT** gain.
In a straightforward example, if the chargeable gain on the disposal of the interest for the whole period of ownership was £20,000, but that disposal also gave rise to a gain chargeable to NRCGT** of £5,000 for the period of ownership from 6 April 2015, then only a gain of £15,000 would be caught by TCGA92/S10A*.
The non-resident capital gains rules were amended in their scope for disposals from 6 April 2019, see CG73920 onwards and in particular CG73960.
The example below considers a more complicated scenario for a disposal before 5 April 2019 where private residence relief and lettings relief is also due.
Example
Mr A is resident in the UK and acquires a property on 6 April 2012 for £150,000 that he lives in as his residence.
On 5 April 2014 he leaves the UK to travel abroad indefinitely. His is not UK resident from 6 April 2014 and his UK property is let from 6 April 2014 until 5 April 2017. From 6 April 2017 the property is empty and is sold on 5 October 2017 for £299,000. The value of the property at 6 April 2015 was £190,000.
The property disposal on 5 October 2017 is within the scope of NRCGT**.
Mr A returns to the UK and is resident from 6 April 2018. The period of return is the 2018-19 tax year.
The amount of NRCGT** gain depends on whether an election is made under Para 2 Sch 4ZZB TCGA92.
Option 1 - No election made:
Disposal proceeds £299,000
Value at 6 April 2015 £190,000
-————
Gain before any PRR £109,000
PRR due:
Period 6 April 2016 to 5 October 2017 (Last 18 months) 18/30 x £109,000 = £65,400
Lettings relief restricted to £40,000 i.e. lesser of £40,000
Gain by virtue of letting from April 2015
(period 6 April 2015 to 5 April 2016 i.e. 12/30 x 109,000) £43,600
PRR due £65,400
NRCGT** gain chargeable = £3,600 i.e. £109,000 – (£65,400 + £40,000)
Option 2 – Para 2 (1)(a) straight-line time apportionment election
Disposal proceeds £299,000
Cost £150,000
-————
Un apportioned gain £149,000
Post April 2015 gain £67,727 (£149,000 x 30/66)
PRR due:
Period 6 April 2016 to 5 October 2017 (Last 18 months) 18/30 x £67,727 = £40,637
Lettings relief restricted to £27,090 i.e. lesser of £40,000
Gain by virtue of letting
(period 6 April 2015 to 5 April 2016 i.e. 12/30 x 67,727) £27,090
PRR due £40,637
NRCGT** gain chargeable = nil i.e. £67,727 – (£40,637 + £27,090)
Option 3 – Para2(1)(b) retrospective basis election
Disposal proceeds £299,000
Cost £150,000
-————
Gain £149,000
PRR due:
Period 6 April 2012 to 5 April 2014 (actual occupation) 24 months
Period 6 April 2016 to 5 October 2017 (Last 18 months)
42/66 x £149,000 = £94,819
Lettings relief restricted to £40,000 i.e. lesser of £40,000
Gain by virtue of letting
(period 6 April 2014 to 5 April 2016 i.e. 24/66 x 149,000) £54,181
PRR due £94,819
NRCGT** gain chargeable = £14,181 i.e. £149,000 – (£94,819 + £40,000)
Gains for s10A* purposes
The gain on disposal of the property in 2017-18 would be £14,181 (in this example this is the same as in option 3) however this amount must be reduced by the NRCGT** gain that accrued.
- If no election had been made under par 2 Sch 4ZZB TCGA 92 for the NRCGT** gain:
Gain would be £10,581 (£14,181 - £3,600)
- If an election under para 2(1)(a) has been made for the NRCGT** gain
Gain would be £14181 (£14,181 – nil)
- If an election under para 2(1)(b) has been made for the NRCGT** gain
Gain would be nil (£14,181 - £14,181)
The 2017-18 gain (either 1, 2 or 3 above) together with any other gains of that year or other years within the temporary period of non-residence would be added together and treated as accruing in the period of return i.e. 2018-19.
It cannot be assumed that the individual will have made an election under para 2(1)(b). With the availability of the annual exempt amount option 1 or 2 above may have been chosen. Details of any elections made will have been included on the NRCGT** return.
*These provisions were re-written for disposals from 6 April 2019 see CG10150.
**In addition the scope of the rules charging non-residents on certain disposals were extended from 6 April 2019 to include direct and indirest disposals of interests in UK real property see CG73920 onwards.