Overseas aspect of Capital Gains Tax
Residence
An individual who is UK resident or ordinarily resident and is UK domiciled is assessed to CGT on his worldwide gains. Individuals who are not resident in the UK are not usually assessed on CGT even if the assets are UK assets.
Non-residents usually qualify for full tax allowances. They may also qualify for allowances and relief under double taxation rules.
The gains and losses associated with a branch or establishment through which a trade or profession is conducted in the UK are taxable regardless of the residence of the person who conducts that trade or profession.
The test for residence is the same as that in relation to income tax. It is based on a combination of the number of days spent and the existence of one or more of a number of sufficient ties to the United Kingdom. See the Income Tax Overview in this regard. The same tests apply to capital gains tax.
A person who goes abroad to live permanently or is outside United Kingdom for more than three years is non-resident from the day after his date of departure.
A person who has been resident in the United Kingdom for four of the previous seven years prior to departure and within five years returns to take up residence remains subject to UK capital gains tax.
Non- residents have been liable for capital gains tax on residential property since 5 April 2015. However, the tax applies only to the element of gain since 5 April 2015. The value on 5 April 2015 may be established or the gain may be apportioned over the period of ownership so that the post 5 April 2015 gain only, is charged
Non-Domiciled
Non UK domiciled UK residents are assessed to CGT (and income tax) on UK gains and income and on overseas gains and income remitted into the UK, provided they pay the £30,000 or £60,000 domicile charge for such treatment.
Domicile is a common law concept that refers to one’s permanent settled residence. It is somewhat fluid in its definition. A person acquires the domicile of a parent generally his father on birth, if his parents (reflecting the common law bias).
Thereafter, he may acquire another domicile by abandoning his domicile of origin or his then current domicile and taking up domicile in another country.This implies establishment in the other country on a permanent or prospectively permanent basis.
Non-domiciled UK residents were charged on the remittance basis above i.e. e taxed only in respect of income or gains remitted to the United Kingdom that represent non-UK income and gains.
Due to the perceived unfairness of this treatment, a non-domicile levy was introduced in 2008. This effectively requires certain non-domiciled persons to pay either £30,000 or £60,000 to continue to avail of the remittance basis. They can elect not to take such treatment in which event their worldwide income and gains are subject to UK tax and they do not pay the levy.
The annual domicile levy is £30,000 for a person who has been resident for at least seven of the previous nine years. It is £60,000 for a person who has been resident for at least 12 of the previous 14 years.
The domicile levy is in addition to the UK income and capital gains tax which otherwise arises. Funds to pay the tax are not themselves deemed to be remitted. Unremitted income and gains on which the charges is paid are not taxed again when remitted into the United Kingdom.
Since 6 April 2017 non-domiciled persons who have been resident in the UK for 15 of the previous 20 tax years are deemed UK domiciled for income tax and capital gains purposes stop after a further period of residence for one out of the two previous years.
After 6 April 2017 persons who are born in the UK domicile but later acquire a different domicile of choice are treated and deemed to be resident in the UK.
Double Taxation Relief
An individual who is UK resident or an ordinarily resident individual may be subject to CGT under the laws of the country say where the asset concerned is situate. Double taxation relief will often be available under a Treaty between the UK and the overseas country concerned. Alternatively, unilateral credit might be available.
Double taxation Treaties generally operate as follows. Tax is calculated under the UK rules in the normal way. There is then deducted the lower of the overseas CGT suffered or the UK CGT attributable to the overseas assets. To calculate the UK CGT attributable to the overseas assets certain computations are undertaken.