Patricia Mock, a tax director in the private client services practice at Deloitte, commented on the implications of the Autumn Statement 2013 for owners of UK residential property:
Principal private residence exemption
If a house has been a main residence at some time in the ownership period, the proportion of the gain relating to that period is exempt on sale. Whether or not the house is occupied in the final three years, the gain relating to that period is also exempt from CGT. This three year period is to be reduced to 18 months from April 6, 2014.
The exemption is designed to give people who need to relocate a period in which to sell their house. It was originally one year and was increased from one year to three when the property market was slow some years ago. It is hoped that the slow housing market in some areas does not mean unforeseen tax charges in some cases, although we are told that some protected groups will be exempt from the change.”
Capital gains tax for non-residents
As widely rumoured, the Autumn Statement contains proposals to tax non-residents on gains made on the sale of residential property. This follows the changes in the 2013 Finance Act introducing such a charge on non-resident companies disposing of UK residential property worth more than £2 million.
The charge will affect disposals of all UK residential property by non-resident individuals, and non-resident corporates where the property is worth less than £2m and will apply from April 6, 2015. It is expected to raise £345 million by 2018/19.
The Statement referred to future gains being taxed, so it seems likely the gain will be based on growth in value from the April 6 2015 start date, as was the case when the charge for companies was introduced. It is not clear how the charge will be enforced, and it is possible a withholding will be required by purchasers, in line with the position in the US. There will be numerous complexities to be considered, not least the interaction with already existing beneficiary charges in respect of trusts. Needless to say, the period of consultation is welcomed.