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December 5, 2013

Changes to Capital Gains Tax - Autumn Statement 2013

The government has announced two important changes to capital gains tax (CGT) in the Autumn Statement 2013:

1. Private Residence Relief (PRR)

Formerly known as Private Residence Relief or PPR, this relief exempts the gain arising on a sale of a persons only or main home.

Broadly speaking, the exempt element of the gain is calculated by comparing the period of ownership to the period of occupation.

However, there are a number of important extensions to the relief, known as periods of deemed occupation.

Perhaps the most useful of these is that where a person has at any time lived in the property as their sole/main residence, the gain attributable to the last 36 months of ownership will automatically be exempt from CGT.

From April 2014, this will be reduced to 18 months.

This reduced relief is perhaps not all that surprising given that HMRC have taken a number of private residence relief cases to court recently and may be looking to tighten up on the availability of this valuable CGT relief.

See our recent blog on private residence relief and the case of Moore v HMRC http://wp.me/p3gayI-40

2. Non UK Residents and Capital Gains Tax

Currently non UK residents are not normally liable to UK capital gains tax on the disposal of either UK or overseas based assets.

From April 2015, non UK residents will be liable to UK capital gains tax on the disposal of UK residential property.

Chancellor George Osborne said although the UK welcomes investment from all over the world, it was unfair that UK residents pay CGT when they sell a home that is not their primary residence, while non-residents do not.

Other Measures

Details of more announcements from the Autumn Statement will follow shortly in our Winter 2013 Tax Update.

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