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We are urging our non-resident landlords (those who live and work abroad) to get their UK properties valued now, even if they have no intention of selling. This is to prevent you potentially paying too much tax when you do eventually sell.
Eaton-Terry Clark are not qualified to provide financial advice and always suggest you speak with your own financial/tax advisor, however changes to Capital Gains Tax in 2015 have important implications.
Until April 5, non-UK residents could potentially dispose of UK assets without incurring a capital gains tax liability. However, from April 6, capital gains tax liability can arise on non-UK residents who dispose of UK residential property, but the gains will be ONLY applicable to gains accruing after April 6 2015.
For example – a UK residential property purchased in 2000 by a non-UK resident for £100,000 is valued at April 6, 2015, at £250,000 and it is sold in June 2015 for £265,000.
For a UK resident selling a buy-to-let property the gain arising would be calculated as the difference between the sale proceeds of £265,000 and the original cost of £100,000.
However, under the new rule introduced for non-UK residents, the gain will be the difference between the sale proceeds and the value of the property as at April 6, 2015 (in the above example £15,000).
If non-UK resident property owners do not get a valuation now, then an alternative would be to apportion the total gain over the whole period of ownership, but this could result in a hefty tax bill. A non-UK resident could try to obtain a retrospective valuation, but this will be complex, time-consuming and costly.
It is likely that HMRC will penalise non-resident landlords who do not make a disclosure when they sell a UK property – even when there is no tax due. There are rules for how and when you need to notify HMRC if you sell a property – so please check with your financial/tax advisor.
The Deregulation Bill 2015 – was rushed through in the dying weeks of the previous government. One area it addressed concerned Immigration. Landlords (or their agents) need to undertake the necessary checks FROM FEBRUARY 1st 2016 to prevent those who have no right to live in the UK from taking up or remaining in tenancies. This can be complicated as the landlord (or his/her agent) is responsible for checking that the tenant’s visa or work permit does not expire during the tenancy, and if it does they need to inform the authorities.
The list of permitted residents is not clear to interpret and puts yet another arduous task onto the shoulders of landlords. A degree in Geography and international politics would certainly be an asset to master this new law. (See below for details).
Not content with making landlords and agents unpaid tax collectors, property inspectors, risk assessors and (in some cases) social workers, the new regulation puts more pressure onto the private rental sector, and crippling prosecutions can be brought. There is scant guidance for situations where (for example) a joint tenancy is awarded to a couple one of whom is a ‘permitted’ resident and the other has an expiring/expired visa. There is also no continuity in the process as to what to DO should you be in this situation. If you evict your tenant they cannot be rehoused elsewhere as they are not permitted to be on the UK, so they are more likely to go ‘underground’ or rent from unregulated and immoral landlords – hence increasing the immigration issue as well as that of bad housing……
For a little light reading, the following is a summary of the requirements
Tenancies can happily be awarded to the following; British nationals, European Union citizens, non EU member states of the EEA – i.e. Norway, Lichtenstein, Iceland and members of Overseas countries and territories.
However there are 56 countries and territories that do not need an entry visa for stays of up to 6 months. Anyone planning on staying for longer than the permitted six months must obtain a proper visa (study, work, or otherwise) in order to remain in the UK legally. Nationals of the following 10 countries now need a visa when staying in the UK longer than six months – Australia, Canada, Hong Kong SAR, Japan, Malaysia, New Zealand, Singapore South Africa, South Korea and the USA.