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CGT shake-up outlined in draft legislation

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10th Dec 2013
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The government has published draft legislation that will shorten the final period exemption for CGT relief on primary residences from April next year. Legislation will also bring about changes to CGT for non-residents. Robert Lovell reports on the Finance Bill 2014 proposals that have caused most concern among tax advisers.

Private residence relief final period exemption

As announced in the Autumn Statement last week, legislation will be introduced to reduce the final period of ownership of a property which qualifies for private residence relief from 36 months to 18 months. As outlined in the new consultation draft, these changes will come into effect from 6 April 2014. Sales agreed after that date will be affected, but it will not apply where contracts are exchanged on or before 5 April 2014 as long as they are completed on or before 5 April 2015. 

A new relief will be introduced so that some disabled people and people moving into care homes will get final period exemption for the last 36 months.
"Those affected by this change are likely to be wealthy individuals with more than one property" and have two or more private residences at the same time for a period of more than 18 months, HMRC noted. 
Non-residents to lose CGT exemption

A CGT charge, the details of which will be put out for consultation in early 2014, will also be introduced on future gains made by non-residents disposing of UK residential property.

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

Following the Chancellor’s statement last week, some AccountingWEB members suggested this might be an attempt to cool the housing boom in central London, while others looked more for technical guidance around the timing of disposals.

“Why on earth is the non-resident CGT to be introduced from April 2015?” asked jon_griffey. “This will give those involved time to rearrange their affairs accordingly to mitigate its effect and it appears to only be for 'future gains' arising after April 2015.

“There must be a colossal amount of property out there owned by non residents which is heavily pregnant with capital gain,” he said.

Old Greying Accountant answered: “He is giving them time to sell up, creating a surplus of supply and so damping house price inflation thus simultaneously avoiding the need to increase interest rates whilst giving the indigenous population the chance of affording their own home!”

The Chancellor explained that 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.

Richard Mannion, national tax director at Smith & Williamson, said: “It will be some time before we know the detail of the changes but this may be a problem for UK people who live abroad but keep a home here. However the delayed introduction will give time for many to sell free of CGT in the interim.”

Naomi Heaton, chief executive of LCP, said until the legislation is fleshed-out investors will be unlikely to make any rash moves and that restructuring should not be considered at this time.

“It is possible that the uncertainty caused by the consultation period will have a dampening effect on investor appetite. This may provide a short term investment opportunity,” she said. “Over the medium to longer term, the appeal of bricks and mortar in Prime London Central will endure and investors are likely to absorb CGT as a cost of investment.”

Annual exempt amount

The CGT annual exempt amount (AEA) for 2014-15 will be £11,000 and rise to £11,100 in 2015-16. According to the FB2014 overview, for the 2014-15 period the AEA is not available to non-domiciled individuals who claim the remittance basis of taxation for the tax year.

The AEA is automatically increases in line withe the consumer prices index for the 12 months to September in the preceding tax year, rounded up to the next £100. But Parliament can override automatic indexation and set a different figure in the Finance Act. For the tax year 2016-17 onwards the AEA will continue be adjusted in line with inflation, unless parliament decides otherwise.

Rebecca Benneyworth is putting together an assessment of the Autumn Statement and Finance Bill 2014 draft clauses, sponsored by BTCSoftware, which will be published next week.

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By kiwilondon99
16th Dec 2013 19:47

Resident but non dom

 

 

taxpayers been here 30+ years !  where does that fit in [ home owner business owner and 'family'] with the family home.  So CGT on half the family home now...... is this what is being mooted ?

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