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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4879
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I am a non-resident. I bought a one-bedroom studio under

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I am a non-resident. I bought a one-bedroom studio under construction in 2012, for about Stg260,000. The property is scheduled for completion in May July 2016. I plan to dispose it either before or after completion, but most likely after April 2015. Would appreciate your advise what would be the basis for determining the cost of my property for the purpose of computing my capital gains, and the applicable rate. Is it better to dispose now before completion (which could only be finalised after April 2015) or to wait for completion?

I also bought 3 student accommodations (at three different locations in Liverpool, Manchester and Nottingham) which are also under construction, at about Stg70,000 earch. Are these exempted from the new capital gains tax?Thank you. Mohammed Hussein Malaysia

Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.

Hello and welcome to the site. Thank you for your question.

Please advise
Are you living in Malaysia?

Basically, if you are non-resident in the UK for UK tax purposes, any gain you make on sale of property would not be chargeable to UK capital gains tax.

This concession is being withdrawn from 6 Apr 2015. Any gains made after 5 Apr 2015 would be chargeable to UK CGT.

Non-residents will be charged a rate of 18% or 28% on the gains that they make, depending on their total UK income and gains.

The gain would be determined against the valuation of the property at 5 Apr 2015 and not the cost price when you first bought it, if the purchase was pre 6 Apr 2015.

If you were to dispose of your one-bedroom studio before the charge comes into force, then all gain would be exempt from CGT.

The same would apply to 3 student accommodations mentioned.

More information on this can be found here

http://www.wilkinskennedy.com/services/tax/personal-tax/uk-residential-property-proposed-capital-gains-tax-on-non-uk-residents-from-6-april-2015/

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 2 years ago.

Thank you for your reply. I'm afraid there are some gaps which require further clarification:

1. Just to clarify, I am a non-resident, living in Malaysia, and not deriving any other income from UK until the properties are completed and I will start to earn some rental income.

2. I asked whether it is advisable to sell before or after completion. I presume from your answer that the only difference is whether I sell before 5th April 2015 or after that date.

3. I asked about the applicable rate on the capital gains tax. Based on your answer, what is the threshold income that would attract 18%, and the threshold income that would attract 28%. In the absence of other UK income, I expect my total capital gain from the disposal, and therefore my total UK income, to be not more than Stg70,000.

4. My understanding is that income from rental from student accommodation does not attract income, as part of existing tax incentives to encourage supply of student accommodation. Does this tax exemption also apply to capital gains on sale of student accommodation?

Thank you.

Expert:  taxadvisor.uk replied 2 years ago.
Thank you for your reply.

[q]

1. Just to clarify, I am a non-resident, living in Malaysia, and not deriving any other income from UK until the properties are completed and I will start to earn some rental income.

[a]

You would only be liable to UK income tax once you start getting rental income.

[q]

2. I asked whether it is advisable to sell before or after completion. I presume from your answer that the only difference is whether I sell before 5th April 2015 or after that date.

[a]

As stated in my previous posting, CGT would come into play if you sell the property post 5 Apr 2015

[q]

3. I asked about the applicable rate on the capital gains tax. Based on your answer, what is the threshold income that would attract 18%, and the threshold income that would attract 28%. In the absence of other UK income, I expect my total capital gain from the disposal, and therefore my total UK income, to be not more than Stg70,000.

[a]

The threshold for tax year 2014-15 is

income and/or gain up to £31,865 - cgt rate18%

£31,865+ - cgt rate 28%

so if the gain was £70,000 then CGT would be (31,865 x 18%) + (38,135 x 28%) = £16,414

[q]

4. My understanding is that income from rental from student accommodation does not attract income, as part of existing tax incentives to encourage supply of student accommodation. Does this tax exemption also apply to capital gains on sale of student accommodation?

[a]

CGT applies to all chargeable gains including properties used as student accommodation.

I hope this is helpful and answers your questions.


taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4879
Experience: FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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