Capital gains tax for individuals not resident in the UK
There are special rules for capital gains tax (CGT) purposes that apply to individuals who are normally resident in the UK, but are temporarily resident outside the UK. These rules may apply to you if you are posted overseas.
What are the general rules on when CGT is chargeable?
If you are a UK resident, you may be liable to CGT on disposals of assets located anywhere in the world, not just your UK-located assets.
Non-residents are liable to CGT if they are carrying on a trade in the UK. Since April 2015, if you are non-resident (including in the overseas part of a split year), you may also be liable to CGT on the disposal of UK residential property (although main residence relief may apply).
There are special rules for CGT purposes that apply to individuals who are normally resident in the UK, but are temporarily resident outside the UK. We look at these on the remainder of this page.
When do the special rules apply?
Broadly the rules apply where you were resident in the UK, you left the UK and became non-UK resident and then returned to the UK within 5 years. If these rules apply you are called a ‘temporary non-resident’.
An individual’s residence for these purposes is determined by the rules within the Statutory Residency Test for periods from 6 April 2013.
What do the special rules mean?
If you are a temporary non-resident, then in the year of your return to the UK any gains or losses realised during your period of non-residence (including in an overseas part of a split year), become chargeable to capital gains tax in the year of return. These are anti-avoidance rules to prevent people from leaving the UK to dispose of an asset just to avoid capital gains tax. You may be able to get some relief if you have paid foreign taxes on these gains. Normally no tax charge arises if the asset that was sold during the period of temporary non-residence was acquired during that same period.
For instance, if you went overseas on 1 July 2018 and you were eligible to split the year from this date, then a disposal on, say, 1 September 2018 would not be charged to UK CGT in that year. However, if you return to the UK within five years (say in 2021/22), the disposal will be treated as arising in the year you return. Similarly, if you make a disposal during 2019/20 and return to the UK in 2021/22, the disposal will be taxed as a gain accruing in 2021/22.
Do these rules also apply to the sale of my home in the UK?
Yes, they can also apply to that. There are complex rules applying to the sale of your home in the UK and you should read the page Capital gains tax on the sale of your home.
What about tax in the country where I am living?
Each country may have its own rules on capital gains tax. If you dispose of any asset while you are living outside the UK, you may have to pay foreign tax on any gain that arises. You will need to take advice locally. Any foreign tax that you pay may be used in whole, or in part, against any liability you have to UK CGT in relation to the same disposal.
Where can I find further information?
You can find some basic information on tax if you return to the UK after living abroad on GOV.UK.
GOV.UK has a service allowing you to send questions about capital gains tax if you are not resident in the UK.
HMRC have produced a Helpsheet to guide you if you think you may be a temporary non-UK resident.
The rules are very complex. You should take further advice from a professional tax adviser or HMRC’s Residency unit if you are considering selling an asset. You can find out how to contact HMRC Residency unit on the GOV.UK website. You can find an adviser on the Chartered Institute of Taxation website.