HM Revenue & Customs (HMRC) has outlined key principles in its Capital Gains Manual (CG25000C) detailing how an individual’s tax residence, ordinary residence, and domicile status determine their liability to UK Capital Gains Tax (CGT).
The statutory framework aims to charge CGT on gains where there is a sufficient territorial connection between the individual realizing the gain and the United Kingdom.
Key Highlights:
UK Residents: Individuals who are UK tax residents are generally subject to CGT on their worldwide capital gains, subject to the remittance basis for non-domiciled individuals and relevant Double Taxation Treaties.
Non-UK Residents and UK Property:
Since April 6, 2015, non-residents disposing of UK residential property interests fall within the scope of CGT.
Since April 6, 2019, the scope was expanded to cover direct and indirect disposals of all UK land and real property (including commercial property).
Trade via UK Branch or Agency: Non-residents carrying on a trade, profession, or vocation in the UK through a branch or agency remain chargeable on gains from assets used for the purpose of that business.
Temporary Non-Residence Rules: Anti-avoidance provisions ensure that individuals leaving the UK temporarily cannot escape CGT on gains realized during their period of absence upon returning to the UK.
Statutory Residence Test (SRT): Following the introduction of the SRT from April 6, 2013, the concept of “ordinary residence” is no longer relevant for the 2013/14 tax year onwards.
Tax advisors emphasize that high-net-worth individuals and international investors should carefully assess their residence and domicile status under the SRT (Guidance Note RDR3) and HMRC’s Domicile Manual (RDRM) to optimize tax compliance and treaty claims.