Clause 79 corrects a technical error removing a potential double charge that may result from the interaction of the non-residents CGT (NRCGT) rules with the rules on CGT related to the annual tax on enveloped dwellings (ATED) and other aspects of the CGT code.
We are concerned that the interaction between the CGT charge on disposals of residential property interests by non-residents introduced by Finance Act 2015 and the ATED-related CGT provisions for non-resident companies gives rise to calculations of disproportionate complexity. Although ATED-related CGT was introduced with a different policy intent (that of preventing avoidance of SDLT through ‘enveloping’, rather than achieving parity of CGT treatment between residents and non-residents) the retention of the ATED-related CGT regime operating in tandem with the CGT charge on non-residents means that a single disposal of a property may fall within both regimes, depending on the use of a property from time to time. It is this interaction that leads to this complexity.
In our response to the consultation on ‘Implementing a capital gains tax charge on non-residents’ in June 2014, the CIOT said:
“…a gain arising on the disposal of UK residential property by a non-resident company potentially may fall within the scope of the proposed new CGT charge from 2015, ATED-related CGT from 2013-2015 (assuming that ATED related CGT is abolished from April 2015) and trigger the imputation provisions (TCGA 1992 sections 13, 86 and 87) in relation to gains accruing before 2013.
“The most effective method of importing simplicity into the CGT regime governing the taxation of non-residents owning UK residential property is for ATED-related CGT to be abolished altogether from April 2015. As a result, all acquisitions of UK residential property post April 2015 (the current proposed date for the introduction of the proposed new CGT charge) would be governed by the proposed new charge.”