NRCGT in a nutshell
Non-resident capital gains tax (NRCGT) imposes a UK tax charge where non-UK residents dispose of UK land and property. The latest version of the regime applies to disposals from 6 April 2019 onwards. A previous version of the regime, which applied to disposals of UK residential property only, was in force in relation to disposals that were made between 6 April 2015 and 5 April 2019. The rules for calculating the NRCGT gain or loss depend on the category of disposal.
Which taxpayers are caught by NRCGT?
All non-resident taxpayers, not just those within the scope of CGT, are within the NRCGT regime. Therefore, the regime applies to individuals, personal representatives, trustees, partnerships, companies and collective investment vehicles.
What disposals are caught by NRCGT?
For disposals that take place on or after 6 April 2019, the NRCGT regime applies to:
- direct disposals of an interest in UK land (eg the non-resident disposes of UK land that they own)
- indirect disposals of an interest in UK land (eg the non-resident disposes of shares in a company that owns UK land)
Indirect disposals are caught where the taxpayer has at least an effective 25% investment (called a ‘substantial indirect interest’) in the company and the company derives at least 75% of its total market value from the land. These are also known as ‘property-rich companies’.
The NRCGT regime applies to all types of UK land and buildings. The previous NRCGT regime only applied to direct disposals of UK residential property by non-residents.
How do you calculate the NRCGT gain or loss if the asset is acquired after 6 April 2019?
The NRCGT gain or loss is calculated under normal CGT principles for that asset (eg share matching rules if the disposal is of shares). There is no need for any rebasing.
How do you calculate the NRCGT gain or loss if the asset was acquired before 6 April 2019 but was not within the old NRCGT regime?
This would apply to any indirect disposals and also direct disposals of non-residential UK property.
The taxpayer can choose between the default method (the asset is revalued as at 5 April 2019 and this becomes the ‘cost’ figure in the capital gains calculation) or the retrospective method (the entire gain is chargeable, not just the post-5 April 2019 proportion).
How do you calculate the NRCGT gain or loss if the asset was chargeable under the old NRCGT regime?
The is the case where the UK land was suitable for use as a dwelling during all or part of the period between 6 April 2015 (or date of acquisition, if later) and 5 April 2019. The calculation rules depend on whether the UK land was suitable for use as a dwelling during the whole period or just part of that period.
Where it was suitable for use as a dwelling during the whole period, the taxpayer can choose between the three methods of calculation. Under the default method, the asset is revalued as at 5 April 2015, if acquired before that date, and this becomes the ‘cost’ figure in the capital gains calculation. Under the straight-line method, no revaluation is needed and instead the chargeable proportion of the gain or loss is calculated on a days-basis, with only the post-5 April 2015 proportion being within the scope of the NRCGT regime. Under the retrospective method, the entire gain is chargeable, not just the post-5 April 2015 proportion.
Where it was suitable for use as a dwelling during only part of the period, the taxpayer can choose between two methods of calculation. Under the default method, the asset is revalued as at 5 April 2015, if acquired before that date, and as at 5 April 2019. In relation to the gain or loss arising between 6 April 2015 (or the date of acquisition, if later) and 5 April 2019, only the proportion during which the land was suitable for use as a dwelling is chargeable. The post-5 April 2019 gain or loss is fully chargeable or allowable. Under the retrospective method, the entire gain is chargeable, not just the post-5 April 2015 proportion.
How can NRCGT losses be used?
Losses arising under the NRCGT regime can be set against any chargeable UK gains of the non-resident taxpayer. This is not limited to NRCGT gains. Losses can be set against any gains arising on the disposal of assets connected with the non-resident’s UK trade carried out through a branch or agency.
How are NRCGT disposals reported to HMRC?
For those non-resident taxpayers within the scope of CGT (ie individuals, personal representatives, trustees and partnerships), NRCGT disposals are reported on the CGT UK property disposals return. Prior to 6 April 2020 this was known as the NRCGT return, but the name was changed when the CGT reporting regime expanded to include residential property disposals of UK taxpayers.
The non-resident taxpayer must file the return and pay an estimate of the CGT due within 30 days of the date the transaction completed. Note that it is the date of completion which starts the clock for filing the CGT UK property disposals return and paying the tax, not the date of exchange, which is the operative date for CGT.
If the taxpayer is required to file a self assessment tax return for the tax year, any NRCGT disposals made in that tax year must be reported on that return, along with any CGT already paid.
Companies report the NRCGT gain or loss on the corporation tax self assessment return and pay any tax due by the normal due date.