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The government has scrapped plans to abolish the capital gains tax (CGT) main residence election.
Treasury officials intended to replace the measure with fact-based tests to decide which property would benefit from only or main residence relief, as part of proposals to implement a CGT charge on UK non-residents.
But a change of policy means a non-residents investing in UK residential property and UK residents investing in non-UK property will instead have to meet an occupation requirements.
The government has scrapped plans to abolish the capital gains tax (CGT) main residence election.
Treasury officials intended to replace the measure with fact-based tests to decide which property would benefit from only or main residence relief, as part of proposals to implement a CGT charge on UK non-residents.
But a change of policy means a non-residents investing in UK residential property and UK residents investing in non-UK property will instead have to meet an occupation requirements.
A person will be eligible for only or main residence relief from April 2015 only if he or she was tax resident in the same country as the property for the relevant tax year, or, if he or she was resident elsewhere, he/she spent at least 90 midnights in the property, or across all of properties owned in that country during the tax year.
The new rule will apply to non-residents selling UK residential properties and to UK residents disposing of residential properties located outside the UK. Non-residents will be able to nominate that a UK property meeting the 90-day rule is their only or main residence for a tax year at the time of sale.
The revamped system will affect mainly non-resident individuals and trustees, personal representatives of non-resident deceased people, and some non-resident companies disposing of UK residential property – but it will not apply to institutional investors.
A narrowly- controlled-company test will work alongside an examination of genuine diversity of ownership, to ensure non-resident individuals and closely connected parties who make disposals of UK residential property will be subject to capital gains tax, and that most institutional investors will not.
