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HMRC internal manual

Capital Gains Manual

Non-Resident Capital Gains Tax (NRCGT) - Disposals on or after 6 April 2015: Disposals of a UK Residential Property Interest: Disposals of UK Residential Property Interests

The legislation lays down detailed rules on what constitutes a disposal of a UK residential property interest for the purposes of the new charge to non-resident CGT.

 

TCGA92/Sch B1/para 1 provides that there is a disposal of an interest in UK land within the scope of the legislation in two cases.

 

The first is where the land has at any time in the relevant ownership period consisted of or included a dwelling; or the interest in land subsists for the benefit of land that has at any time in the relevant ownership period consisted of or included a dwelling.

 

The second is where the interest in land subsists under a contract for an off-plan purchase - that is, a contract for the acquisition of land consisting of including a building or part of a building that is to be constructed or adapted for use as a dwelling.  See CG73758.

 

“Relevant ownership period” means the period from the day of acquisition of the interest or 6 April 2015 (whichever is later) to the day before the interest is disposed of.

 

Where the interest in UK land results from acquisitions that the person made at different times, they are regarded for the purposes of Sch B1/para 4 as having acquired the interest on the date of the first of the acquisitions.

 

Sch B1/para 2 gives a wide definition of “interest in UK land”.  It means an estate, interest, right or power in or over land in the UK, and includes the benefit of an obligation, restriction or condition affecting the value of estate, interest, right or power in or over land in the UK.  The definition covers most forms of interest in or over UK residential property and the land on which it is situated.  This would include disposals of both freehold and subsidiary interests.  That broadly follows other major statutory provisions defining interests in or over land, for example FA2013/S107 for Annualised Tax on Enveloped Dwellings (ATED).

 

Sch B1/para 10 explains that “land” includes a building for the purposes of Sch B1.  There are various “excluded interests” which do not count as “interests in UK land”.  This covers “security interests” (an interest or right held for the purpose of securing the payment of money or the performance of any other obligation); a licence to use or occupy land; and a tenancy at will or a manor.  There are minor modifications in relation to land in Scotland.  There is no exemption for joint interests, as is found in the provisions for ATED, as this is already addressed elsewhere in the statute (for example TCGA92/S248).

 

Sch B1/para 3 deals with the case where an option is granted binding the grantor to sell an interest in UK land, the disposal of which would be the disposal of a UK residential property interest.  The grant of such an option is to be treated as the disposal of an interest in UK land.

 

 

Various provisions in the non-resident CGT legislation deem that a “building” includes part of a building.  This is necessary because there are differences in tax treatment between residential and non-residential property, but such property may be found within the same building.  In individual cases it may sometimes be difficult to decide whether any particular part of a building should be looked at independently from other parts, or whether the building should be looked at as a whole.  Such cases should be decided on their facts.