CG73710 | Non-Resident Capital Gains Tax (NRCGT) - Disposals on or after 6 April 2015 to 5 April 2019: The Charge to Non-Resident CGT, and the exemptions: Introduction

The legislation applies a charge to non-resident CGT on disposals of UK residential property interests, but it allows persons who meet certain conditions to claim exemption from a charge.

The charge should broadly apply to companies that are directly or indirectly controlled by a small number of individuals. But the charge should not apply to entities that are part of a group with a diverse shareholder base, such as publicly listed companies or their subsidiaries, nor to entities that are, or are ultimately owned and controlled by, institutional investment schemes with a diverse investor base.

The aim is to ensure the charge applies to companies that are the private investment vehicles of individuals, families or other small groups. Unless the legislation contained suitable targeting provisions, it would be possible for persons who would otherwise be within the scope of non-resident CGT to avoid the charge by transferring their interest in UK residential property to a non-resident company.

Also, the charge does not fall on institutions that make large scale investment of funds derived from a diverse range of individual investors in the UK residential property market. Imposing such a charge might have an adverse impact on the supply of new residential property, especially for the rental sector.

The legislation therefore includes a series of tests to distinguish the different entities that should be subject to a charge from those that should be entitled to exemption.