Doctors and other professionals who are living overseas and who sell a home in the UK should beware of being caught out by changes to the capital gains tax rules.
The changes, which came into force on 6 April 2015, mean that non-UK residents must pay tax on any increase in the property’s value from that date until the date of the sale, and to submit a capital gains tax return within 30 days of completion.
Melanie Thomas of Hall Liddy says the firm is aware of a number of cases where medical professionals have unwittingly fallen foul of the rules. “Many doctors who go to live or work overseas are unaware of the changes. If they decide to sell their property while they are out of the country, it often doesn’t occur to tell their accountant until it’s time to do their annual tax return, when it may be too late.
“One client has been hit by a heavy penalty for failing to submit a return within the 30-day period – even though there was no capital gains tax payable. He didn’t inform us of the sale at the time and the solicitors which carried out the conveyancing failed to advise him of the rules.”
The rules apply to non-UK residents selling UK residential property, whether it is their home or a rental property. Therefore this represents a potential new tax charge as previously non-residents would have paid no capital gains tax on their UK residential property. They must also submit an online capital gains tax return within 30 days of the sale, whether there is any tax to pay or not, and even if they have made a loss on the property. If, as in the case above, the property is held jointly, then each non-resident person must file a return and pay their share of any charge. To calculate any capital gains due, they will have to have a valuation of property as at 6 April 2015.
Any tax due must also be paid within 30 days of the sale, although those who are registered for UK tax can choose to pay it at the same time as tax due for their normal self-assessment – in other words, by 31 January 2018 for gains realised in the 2016/17 year. There are daily penalties for the failing to file a return or pay the tax on time.
Melanie adds: “The rules are complex so the best solution for anyone in this position and considering a sale is to consult your accountant in advance for advice on your individual circumstances.”