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Posted on April 22nd 2015 by admin-movingin

Buy-to-let: All non-UK resident landlords should get properties valued now

Here is advice that some agents may find useful to pass on to clients living abroad and who own rental properties in this country.

According to one accountant, they should get these properties valued now, even if they have no intention of selling.

She warns that failing to get a property valuation as soon as possible could mean they end up paying more tax when they do eventually sell.

Her advice relates both to ex-pats and to foreign nationals with rental properties in the UK.

Clearly, everyone needs to take their own professional advice suited to their own circumstances, but according to Carol Cheesman of Cheesmans Accountants, changes to Capital Gains Tax have important implications.

Until April 5, non-UK residents could potentially dispose of UK assets without incurring a charge to CGT liability.

However, from April 6, a charge to CGT will arise on non-UK residents (including trustees, certain companies and personal representatives as well as individuals) who dispose of UK residential property.

Importantly, she says, the charge will only be applicable to gains accruing after April 6.

To help clarify this, Cheesman gives the following example: a UK residential property purchased in 2005 by a non-UK resident for £150,000 is valued at April 6, 2015, at £300,000 and it is sold in June 2015 for £310,000.

For a UK resident selling a buy-to-let property the gain arising would be calculated as the difference between the sale proceeds of £310,000 and the original cost of £150,000.

However, under this new rule introduced for non-UK residents, the gain will be the difference between the sale proceeds and the value of the property as at April 6, 2015.

If non-UK resident property owners do not get a valuation now, then an alternative would be to apportion the total gain over the whole period of ownership. However, this could result in a hefty tax bill.

A non-UK resident could also attempt to obtain a retrospective valuation, but this will be complex, time-consuming and costly.

Cheesman also advises that on selling the property, a Non-Resident Capital Gains Tax (NRCGT) return will need to be filed with HMRC within 30 days of completion.

If the non-UK resident does not have an “established relationship” with HMRC, that is, they do not need to complete and file a UK tax return, then the NRCGT return will also need to contain an assessment of the tax due and this tax will also need to be paid within 30 days of completion.

Where there is an “established relationship”, the assessment of tax will be contained in the tax return that is to be submitted to HMRC for the year in which the disposal was made. The tax due would then be payable by the usual due date.

It is likely that HMRC will penalise those who do not make a disclosure – even when there is no tax due.

Cheesman says: “It is important therefore for those non-UK residents with relatively straightforward tax affairs who do not usually correspond with HMRC (e.g. a retired pensioner) to be aware of the requirements for notifying them of a disposal of a UK residential property.

“In conclusion, it is highly advisable to obtain a valuation of the property as soon as possible in order to avoid guesswork in the future, or costly valuation fees.”