The UK government has published its plans to impose capital gains tax (CGT) on disposals of UK property by non-resident individuals. This will entitle non-residents to the same capital gains tax relief as is given to residents when their UK property sold is their main residence. This is the principal private residence exemption. However, the proposed changes restrict the exemptions for CGT purposes unless the individual has resided in the property for at least 90 midnights. This also creates potential issues on where a non-resident who has a home in which he has resided in for 90 midnights might find himself becoming tax resident under the sufficient ties test of the Statutory Residency Test.
A key point that has only now been decided is that non-resident owners of homes in the UK will be entitled to the same CGT reliefs and exemptions as UK taxpayers. In particular, they can claim 100 per cent CGT relief on their UK home if it is their main residence – the so-called principal private residence (PPR) exemption.However, an extra restriction has been introduced on the PPR exemption. In the past, a UK taxpayer who lived in more than one home was free to elect which was to be the main residence for PPR purposes.