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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Capital Gains manual: individuals: effects of residence and domicile for departures on or after 6 April 2013 and general rules from 6 April 2013: Arrival in and departure from UK: temporary non-residence: interaction with NRCGT

TCGA92/S2(7A)

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 2014 he leaves the UK to travel abroad indefinitely. His is not UK resident from 6 April 2014 and his UK property is let from 6 April 2014  until 5 April 2017. From 6 April 2017 the property is empty and is sold on 5 October 2017 for £299,000. The value of the property at 6 April 2015 was £190,000.

The property disposal on 5 October 2017 is within the scope of NRCGT.

Mr A returns to the UK and is resident from 6 April 2018. The period of return is the 2018-19 tax year.

 

The amount of NRCGT gain depends on whether an election is made under Para 2 Sch 4ZZB TCGA92.

 

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 April 2016 to 5 October 2017 (Last 18 months) 18/30 x £109,000 = £65,400

 

Lettings relief restricted to £40,000 i.e. lesser of                                   £40,000

Gain by virtue of letting from April 2015                                                           

(period 6 April 2015 to 5 April 2016 i.e. 12/30 x 109,000)                      £43,600

PRR due                                                                                   £65,400

 

NRCGT gain chargeable = £3,600 i.e. £109,000 – (£65,400 + £40,000)

 

 

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      £67,727            (£149,000 x 30/66)

 

PRR due:

Period 6 April 2016 to 5 October 2017 (Last 18 months) 18/30 x £67,727 = £40,637

 

Lettings relief restricted to £27,090 i.e. lesser of                                   £40,000

Gain by virtue of letting                                               

(period 6 April 2015 to 5 April 2016 i.e. 12/30 x 67,727)                        £27,090

PRR due                                                                                   £40,637

 

NRCGT gain chargeable = nil i.e. £67,727 – (£40,637 + £27,090)

 

Option 3 – Para2(1)(b) retrospective basis election

Disposal proceeds         £299,000

Cost                             £150,000

                                    -–-–-–-—

Gain                             £149,000

 

PRR due:

Period 6 April 2012 to 5 April 2014 (actual occupation) 24 months

Period 6 April 2016 to 5 October 2017 (Last 18 months)

            42/66 x £149,000 =                                                      £94,819

 

 

Lettings relief restricted to £40,000 i.e. lesser of                                   £40,000

Gain by virtue of letting                                               

(period 6 April 2014 to 5 April 2016 i.e. 24/66 x 149,000)                      £54,181

PRR due                                                                                   £94,819

 

NRCGT gain chargeable = £14,181 i.e. £149,000 – (£94,819 + £40,000)

 

Gains for s10A purposes

The gain on disposal of the property in 2017-18 would be £14,181 (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 £10,581    (£14,181 - £3,600)       

 

  1. If an election under para 2(1)(a) has been made for the NRCGT gain

Gain would be £14181   (£14,181 – nil)

 

  1. If an election under para 2(1)(b) has been made for the NRCGT gain

Gain would be nil                      (£14,181 - £14,181)                                        

 

The  2017-18 gain  (either 1, 2 or 3 above) together with any other gains of that year or other years within the temporary period of non-residence would be added together and treated as accruing in the period of return i.e. 2018-19.

 

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.