CG26310 - Capital Gains manual: individuals: effects of residence, ordinary residence and domicile: temporary non-residents: Arrival and departure from UK: temporary non-residence: Interaction with NRCGT – year of departure 2012-13 or earlier
A disposal of an interest in UK residential property by an individual in a year of non-UK residence or the overseas part of a split year is caught by the charge to NRCGT. Guidance on NRCGT is from CG73700 onwards.
Where the disposal is also within the scope of TCGA92/S10A an adjustment is required to ensure that a double charge does not arise on the NRCGT gain.
In a straightforward example, if the chargeable gain on the disposal of the interest for the whole period of ownership was £20,000, but that disposal also gave rise to a gain chargeable to NRCGT of £5,000 for the period of ownership from 6 April 2015, then only a gain of £15,000 would be caught by TCGA92/S10A.
The following example considers a more complicated scenario where private residence relief and lettings relief is also due.
Example
Mr A is resident in the UK and acquires a property on 6 April 2012 for £150,000 that he lives in as his residence.
On 5 April 2013 he leaves the UK to travel abroad indefinitely. He is not UK resident from 6 April 2013 and his UK property is let from 6 April 2014 until 5 May 2015. The property is then used by a relative for 2 months before being let again from 6 July 2015 until 5 October 2016. It was empty until sold on 5 January 2017 for £299,000. The value of the property at 6 April 2015 was £190,000.
The property disposal on 5 January 2017 is within the scope of NRCGT.
Mr A returns to the UK and is UK resident from 6 April 2017. The year of return is the 2017-18 tax year.
The amount of NRCGT gain depends on whether an election is made under Para 2 Sch 4ZZB TCGA92.
NRCGT Option 1 - No election made:
Disposal proceeds £299,000
Value at 6 April 2015 £190,000
-————
Gain before any PRR £109,000
PRR due:
Period 6 July 2015 to 5 January 2017 (Last 18 months) 18/21 x £109,000 = £93,429
Lettings relief restricted to £5,191 i.e. lesser of £40,000
Gain by virtue of letting from April 2015
(6 April 2015 to 5 May 2015 i.e. 1/21 x 109,000) £5,191
PRR due £93,429
NRCGT gain chargeable = £10,380 i.e. £109,000 – (£93,429 + £5,191)
NRCGT Option 2 – Para 2(1)(a) straight-line time apportionment election
Disposal proceeds £299,000
Cost £150,000
-————
Un apportioned gain £149,000
Post April 2015 gain £54,895 (£149,000 x 21/57)
PRR due:
Period 6 July 2015 to 5 January 2017 (Last 18 months) 18/21 x £54,895 = £47,053
Lettings relief restricted to £2,614 i.e. lesser of £40,000
Gain by virtue of letting
(period 6 April 2015 to 5 May 2017 i.e. 1/21 x 54,895) £2,614
PRR due £47,053
NRCGT gain chargeable = £5,228 i.e. £54,895 – (£47,053 + £2,614)
NRCGT Option 3 – Para 2(1)(b) retrospective basis election
Disposal proceeds £299,000
Cost £150,000
-————
Gain £149,000
PRR due:
Period 6 April 2012 to 5 April 2013 (actual occupation) 12 months
Period 6 July 2015 to 5 January 2017 (Last 18 months)
30/57 x £149,000 = £78,421
Lettings relief restricted to £33,983 i.e. lesser of £40,000
Gain by virtue of letting
(period 6 April 2014 to 5 May 2015 i.e. 13/57 x 149,000) £33,983
PRR due £78,421
NRCGT gain chargeable = £36,596 i.e. £149,000 – (£78,421 + £33,983)
Gains for s10A purposes
The gain on disposal of property in 2016-17 would be £36,596 (in this example this is the same as in option 3) however this amount must be reduced by the NRCGT gain that accrued.
1) If no election had been made under par 2 Sch 4ZZB TCGA 92 for the NRCGT gain:
Gain would be £26,216 (£36,596 - £10,380)
2) If an election under para 2(1)(a) has been made for the NRCGT gain
Gain would be £31,368 (£36,596 – £5,228)
3) If an election under para 2(1)(b) has been made for the NRCGT gain
Gain would be nil (£36,596 - £36,596)
The 2016-17 gain (either 1, 2 or 3 above) together with any other gains of that year or other intervening years within the temporary period of non-residence would be added together and treated as accruing in the year of return i.e. 2017-18.
It cannot be assumed that the individual will have made an election under para 2(1)(b). With the availability of the annual exempt amount option 1 or 2 above may have been chosen. Details of any elections made will have been included on the NRCGT return.