Capital Gains Tax: An Overview

Capital Gains Tax: An Overview

Property has remained an investment of choice for many but tax planning should be considered part of your investment strategy. However, it is a complex area and a number of recent changes to the tax regime are likely to impact on property investors.Changes to Capital Gains Tax 'principal private residence relief'When selling your main private residence you are entitled to Capital Gains Tax relief known as 'principal private residence relief.' If this is your home and you have always lived there, the situation is usually straightforward.However if you have owned or rented another property at the same time as owning your home that is for sale, the situation becomes more complex.Currently you can be treated as living at a property, even if you haven't physically occupied that property (for example if you have been working away and have had to rent alternative accommodation) during the last 36 months.However, as of April6, 2014, this period is being reduced to 18 months. This means that if you sell your property after April 6, 2014, only the last 18 months' ownership will be considered for Capital Gains Tax purposes and you will receive a lower amount of 'principal private residence relief.'Capital Gains tax to be charged on property gains made by Non-UK ResidentsCurrently, if you are not UK domiciled and not UK resident then Capital Gains Tax is not charged on the sale of a property owned in the UK.However, this will soon change.With effect from April 6, 2015, Capital Gains Tax will be charged on any non-UK resident selling a property. The good news is that the gains charged to tax will be those arising from April 5, 2015, and not before, so the property needs to be professionally valued and that value should be agreed with HM Revenue & Customs. It then becomes the 'purchase price' and it is only gains in excess of this new 'purchase price' that will be charged to capital gains tax on the sale of the property.Annual Tax on Enveloped Dwellings (ATED) ReturnsATED, which came into effect on April 1, 2012, is a tax payable by companies owning high value residential property.A return must be completed for:

  • UK residential property valued at in excess of £2 million on April 1, 2012, or an acquisition, if later;
  • Where that property is owned by a non natural person - most likely to be a company.
There are exemptions which must be claimed on the return.The return for the period April 1, 2014 to March 31, 2015 must be submitted by April 30, 2014, at the beginning of the year it covers.The tax due is payable by April 30, 2014 but prior registration is required.
David Snell is a tax planning specialist and head of personal taxation at Alliotts, based in London and Guildford.
The above article was published in
India Inc′s
print edition of the
India Investment Journal
launched in April 2014 in conjunction with the
.

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