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HS278 Temporary non-resident and capital gains tax (2021)




This help sheet describes the treatment of profits incurred during temporary non-resident periods. But it’s the only introduction. If you have any questions about your situation, you should contact your tax advisor. We will also be more than happy to help you and provide you with all the forms you need. You can also refer to the Capital Gains Tax Manual, which explains the rules in detail.

This article will help you complete the capital gains tax summary page on your tax return.

You may have to pay taxes on certain income you accrue during your temporary non-resident period. This is described in the Temporary Nonresident and Income Tax section below.

Capital gains tax and liability for residence in the UK

If an individual resides in the UK, a capital gains tax (CGT) is usually levied on gains on disposal of assets. Individual status of residence is determined according to the rules of the Statutory Residence Test (SRT).

The SRT rules also stipulate that the tax year can be divided into the UK part and the foreign part. The CGT generally applies only to profits arising from the UK part of the split year. RDR3 Guidance Note: The Statutory Residence Test (SRT) has more information about SRT.

However, individuals not residing in the UK may be taxed on their income if they dispose of:

Assets used (or used) in transactions conducted in the UK through branches or agencies (see CG25500P for details).

Direct or indirect disposal of shares in UK land. This includes UK residential properties (non-resident capital gains on land and real estate in the UK (see Self-Assessment Help HS307)).

Accordingly, individuals who have left the UK to live abroad and cease to reside in the UK will not be charged for any income earned during the assessment period after leaving the UK unless their non-resident is temporary and tax residence is resumed. UK within a certain time.

What does temporary non-resident mean?

This help sheet provides an overview of the rules for individuals returning to the UK from 2020 to 2021. In general, rules apply if an individual meets the following conditions:

They have lived in the UK for at least 4 years of all or part of the 7-year tax year prior to the year of departure. They had a period of residence that was not the only UK residence between the two periods of residence in the UK. The total duration of residence for not being a single resident of the UK has not exceeded 5 years.

For these rules, the temporary non-resident period may start or end within the tax year due to the treatment of a split year (see section 5 of RDR3).

An important concept within these rules is the concept of the only UK residence and length of residence. This is described in section 6 of RDR3.

Therefore, individuals not residing in the UK prior to 2014-2015 and not residing in the UK by 2020-2021 are not included in the scope of the rule. If you have been away from the UK for a short period of time, you may need to consider detailed rules. More information on this can be found in the Capital Gains Tax Manual (see CG26500) and section 6 of RDR3.

Temporary non-resident and CGT

Certain gains and losses incurred during the temporary non-resident period are considered to have accrued from 2020 to 2021 if an individual with a return year to the UK between 2020 and 2021 meets the temporary non-resident conditions described above. Therefore, from 2020 to 2021, a loss-allowed tax is imposed.

Example 1

Smith, who has lived all his life in the UK, left the UK on March 25, 2016 for an overseas employment contract. He returned to England and resumed residence in England on February 2, 2021.

He realized 35,000 billable gains on assets acquired prior to leaving the UK on September 15, 2016. Mr. Smith meets all residency requirements of Section 10A TCGA 1992.

He resumed his residency in the UK from 2020 to 2021 (the return year), a period not exceeding the five years immediately preceding his sole British residence, where he did not reside in the UK. He was living in the UK for at least 4 of the 7 tax years just before the departure year (in this example, actually all 7).

Mr. Smith will claim an income of 35,000 for this income in the tax year he returns to his UK sole residence (2020-2021).

If an individual is a non-resident and claims remittance criteria between 2020 and 2021, any foreign billable profits that occurred during the temporary non-resident period and transferred to the UK may be billed in the year of return.

Treaty non-resident

Different countries may have different fiscal years and rules of residence, so individuals may reside in the UK under national law or in other countries under law. If an individual is a resident of two countries, the Double Taxation Agreement (DTA) between the two countries provides a tie rule to allow them to reside for consensus purposes.

The UK part of the entire tax year or division year in which an individual is considered a UK non-resident under a double tax treaty constitutes part of a period of non-UK residence in accordance with the rules that determine whether an individual is a temporary non-UK resident. Residents (see CG26680 and, for example, CG26690).

Profits and losses included

Some gains and losses incurred during temporary non-resident periods are not included in the scope of this rule. Individuals can acquire assets after leaving the UK during temporary residence abroad. If such assets are disposed of during that period, the gains or losses on those assets are generally not treated as accruing when residence in the UK is resumed.

Example 2

On June 6, 2016, with Mr. Smith in Case 1, he purchased 20,000 shares of a British company. He sold all of his shares on March 15, 2017, making a profit of 12,000. Mr. Smith is subject to the provisional non-resident rule, but since he acquired shares after leaving the UK, the earnings are not considered to have been accrued in the revenue year.

Gains and losses on assets acquired after leaving the UK are generally excluded from the scope of temporary non-resident regulations, but there are some important exceptions to this exclusion. Some assets acquired after the commencement of the sole UK residence period is related to the initial period of the UK sole residence period. Profits arising from the disposal of such assets during temporary non-resident periods are not excluded and are billed in the tax return year.

These exceptions fall into three categories:

Assets acquired from another person acquired pursuant to the Profit or Loss Rules (see CG26610) Assets for which the cost of acquisition has been reduced by rollover mitigation resulting from disposition of other assets acquired by an individual (see CG26630). Profits or losses on assets held prior to leaving-can be charged if profits are determined during a temporary non-resident period when other assets are disposed of (see CG26630) Profits and settlements of non-resident companies

When UK residency resumes, you may also need to take into account the benefits accrued to the company or settlement during the non-resident period. these are:

Settlement interests attributable to residents of the UK and residents of residence (see CG57200P) Benefits arising from non-resident settlements (see CG57200P) Profits arising to tightly controlled non-resident companies attributable to UK resident participants in proportion to the extent of participation (see CG38430P and HS299)-UK If interests are also levied on resident beneficiaries (see CG26590), the amount charged to non-resident settlers may be temporarily reduced for capital payments (see CG38570C and HS301) consistent with the interests of the non-resident custodian.

If such an advantage arises during a temporary non-resident period and the individual had resided in the UK, if the individual was charged, it is considered to have occurred during the return period. If your remittance criteria may be relevant, please refer to CG26650 or later.

Double tax relief

In some cases, a temporary non-resident rule may mean that tax is levied in another country in the year in which the income was incurred, and then in the UK in the year of return. If you have paid taxes on your income in another country, you can claim relief for double taxation.

The HS263 Relief for Foreign Tax Paid explains this in detail and provides details on how to claim it.

Temporary non-resident and income tax

Certain types of income received during a temporary non-resident period are also considered accrued in the year of return and are taxed from 2020 to 2021.

these are:

Withdrawals from flexible withdrawal pension funds (see EIM74050) Certain lump sum payments paid under the employer-funded retirement benefit scheme (see EIM15010) are lump-sum payments (see EIM45000) with the relevant steps under disguised remuneration rules (see EIM45000). ) Or, for remittance-based users, the remittance of a certain lump sum paid by the UK Pension Scheme, with charges imposed upon receipt by a double taxation agreement (see EIM74060) removed, considered as income and income of the pension scheme taxed on the scheme. Overseas income related to certain taxable property members (see PTM125000) is assessed and charged on a remittance basis and remitted to the UK during a temporary non-resident period. These relevant foreign income will be treated as remitted to the UK in the period of return (Ref: RDRM31140) Dividends which are dividends paid by a close company (or close company if you live in the UK) you are an important participant or its associate, dividends, non-resident period Dividends arising from trade gains arising from are not subject to tax-Dividends are subject to the terms of double taxation contracts (see CTM61657) arising from the Foreign Asset Transfer Code (see HS262) life insurance, life annuities or capital reimbursement policies (see IPTM3300). Accordingly, loans to participants of close companies that are exempt or amortized at that time, but are not subject to tax, can be used during non-resident periods (see IPTM3734) and gains from offshore income (see OFM17100). However, assets arising from assets acquired and disposed of during a temporary non-resident period are exceptions. Previous residency period (see section above, What is Included in Profits and Loss)

Online form, phone number and address for advice on self-assessment.

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