CG25500 - Individuals: effects of residence, ordinary residence and domicile: non-UK residents with a UK branch or agency
Individuals who are neither resident nor ordinarily resident* in the UK are normally outside the charge to Capital Gains Tax. But if at some time during the year of assessment they carry on a trade, profession or vocation in the UK through a branch or agency they will be within the charge to Capital Gains Tax as regards certain gains and deemed gains relating to that activity.
This charge does not apply to any person who is exempt from income tax on the profits of the branch or agency because of a double taxation agreement. Such persons are also exempt from Capital Gains Tax on the gains related to that activity (TCGA92/S10 (4))**. There is guidance on the effects of double taxation agreements at INTM260000 onwards.
If an individual is within the charge to Capital Gains Tax in respect of a branch or agency activity charges can arise
- on the disposal of assets related to the branch or agency activity
or
- on the happening of certain events giving rise to deemed disposals; the cessation of the branch or agency activity or the transfer outside the UK of assets related to the activity.
* For 2013/14 and subsequent years ordinary residence does not need to be considered.
**This section was re-written for disposals from 6 April 2019 see CG10150.
Disposals
TCGA92/S1B
The disposal of an asset by an individual who is neither resident nor ordinarily resident* but is carrying on a trade, profession or vocation in the UK through a branch or agency will be an occasion of charge and the gain will be within the charge to Capital Gains Tax if
- at the time of the disposal the trade, profession or vocation continues to be carried on through the branch or agency in the UK
and
- the asset is situated in the UK
and
- at or before the time of the disposal the asset has been
- used in or for the purposes of the trade, profession or vocation
or
- used or held or acquired for the purposes of the branch or agency.
This page explains how gains on the disposal of assets of a UK branch or agency are computed.
Where the asset is residential property the reporting requirements in Sch2 FA19 do not apply . The gain would just need to be returned within the Self Assessment return for the year.
* For 2013/14 and subsequent years the rules within the Statutory Residence Test will apply and ordinary residence is not considered.
Individuals - arrivals to and departures from the UK
For the years up to 5/4/2013 an individual is within the charge to Capital Gains Tax for any year of assessment during which he or she is at any time resident or ordinarily resident in the UK (see CG25200). Where an individual who carries on a trade, profession or vocation in the UK through a branch or agency and then takes up residence (or ordinary residence) in the UK or leaves the UK and carries on a trade, profession or vocation in the UK through a branch or agency the conditions of Extra Statutory Concession D2 should be considered. See CG25770.
For the years from 6/4/2013 an individuals residence is determined by the Statutory Residence Test.
Under the rules within the Statutory Residence Test an individual will be either resident or not resident in the UK for a year of assessment. Any gains arising in the year are chargeable under TCGA92/S2*.
Split year treatment does not apply for gains from a trade, profession or vocation in the UK through a branch or agency TCGA92/S2(1C)*.
*This section was re-written for disposals from 6 April 2019 see CG10150
Computation
The computation of a gain on the disposal of an asset of a UK branch or agency is carried out in the same way as any other computation. In particular, you should not permit an acquisition cost based on the market value of the asset when it began to be used for the branch or agency.
The only exception relates to cases in which the activity carried on by the branch or agency is a profession or vocation and the asset was held on 14 March 1989.
If the asset
- ceased to be used in or for the purposes of the profession or vocation or ceased to be held for the purposes of the branch or agency before 14 March 1989 and
- has not been so used on or after that date
any gain on the disposal of that asset is exempt from Capital Gains Tax.
If the profession or vocation
- started before 14 March 1989 and
- the asset was acquired before that date and
- the asset was still in use for the purposes of the profession or vocation immediately before that date
then the asset is deemed to have been disposed of immediately before 14 March 1989 and immediately reacquired at market value. In computing any gain on disposal of such an asset the acquisition cost will be the market value of the asset immediately before 14 March 1989.
Deemed disposals
TCGA92/S25
Without additional legislation an individual could avoid the charge under TCGA92/S10** in certain cases by either transferring assets abroad before disposing of them or by delaying disposal until after the end of the year of assessment in which the branch or agency activities ceased. To prevent this, TCGA92/S25 deems a disposal to take place on the happening of certain events.
TCGA92/S25 only applies to chargeable assets, as defined by TCGA92/S25 (7). An asset is a chargeable asset in relation to a person at any point in time if, on a disposal at that time, a gain would be chargeable on that person only by reason of TCGA92/S10**. In other words to be such an asset in relation to an individual, that individual must be not resident and not ordinarily resident* in the UK and the conditions set out in this page must be satisfied as regards the asset.
There is a deemed disposal if an asset that is a chargeable asset in relation to an individual
- becomes situated outside the UK (except in the case of exploration or exploitation assets as defined in TCGA92/S25 (6)), or
- ceases to be such an asset because the individual ceases to carry on the trade, profession or vocation in the UK through a branch or agency.
But in the latter case there is no deemed disposal if, before the end of the chargeable period in which the cessation occurs, the asset is used in another trade, profession or vocation carried on by that individual in the UK through a branch or agency.
In both cases the asset is deemed to have been disposed of at its market value immediately before the chargeable occasion and then immediately reacquired at that value. You should therefore include that value in the computation as the disposal consideration. The acquisition cost of the asset should be determined according to the guidance on this page.
If the individual ceased to carry on the trade, profession or vocation and the asset is transferred abroad there is only one deemed disposal, with the transfer abroad being ignored (TCGA92\S25 (2)).
* For 2013/14 and subsequent years ordinary residence does not need to be considered.
** This section was re-written for disposals from 6 April 2019 to Section 1B Non-Residents UK branch or agency see CG10150