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HMRC internal manual

Capital Gains Manual

From
HM Revenue & Customs
Updated
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Arrival in and departure from the UK: avoidance risk on emigration

When an individual plans to emigrate from the UK they will often want to dispose of their assets located in the UK before departure. This is particularly true of privately run businesses carried on in the UK but it is often also true of other property located in the UK. For such assets it may be necessary, or at least convenient, for the individual to be in the UK to deal with negotiations for the sale. The individual may also need to have a definite sale arranged in order to ensure he or she has funds for use in the country to which he or she is emigrating.

The emigrating individual will have an expectation that their residence position may change and that this may affect their Capital Gains Tax liability.

If the disposal occurs before the date of departure the individual will be liable to a charge to UK Capital Gains Tax in respect of the chargeable assets disposed of.

But there is no form of capital gains ‘exit charge’ applying to individuals when they emigrate from the UK (see CG13400).

For the years up to and including 2012-13, if the disposal occurs after the date of departure but before the following 6 April there will be no charge to CGT if the concessionary treatment in ESCD2 applies (see CG25760 ) If the disposal occurs after 5 April following departure the gain will be exempt because when it occurs it is outside the scope of TCGA92/S2 (unless the individual later resumes residence in the UK and the temporary non-residence rules in TCGA92/S10A apply).

For 2013-14 and later years an individual will either be resident or not resident in the UK for the year, however split year treatment may apply. If the disposal occurs in the non UK part of a split year the gain will normally be exempt because it is outside of the scope of TCGA92/S2 (unless the individual later resumes residence in the UK and the temporary non-residence rules in TCGA92/S2 or the other exceptions in CG10978 apply).

So if the sale is genuinely postponed and the individuals residence position has changed by the date of disposal then there will be no charge to UK Capital Gains Tax. However, enquiries might reveal that despite appearances the disposal actually occurred on an earlier date or if the year being considered is 2012-13 or earlier that HMRC is justified in withholding the benefit of ESCD2: see CG25805 and CG25793.