Breaking Ties with the UK for CGT purposes

We live in the Isle of Man and we also have no CGT or inheritance tax. A thought!

Hi Fiona

Owning a home in the UK will not directly affect your non-resident status, however, it may affect the amount of time you can spend in the UK without being considered UK resident for tax purposes. Hopefully the following will help.

Below is a very short overview of what I consider to be the key points.

If you spend less than 16 days a rolling year in the UK then you are definitely classified as non-resident for tax purposes.

You can spend more days than that in the UK without becoming resident for UK tax purposes, but this depends on how many ties you have to the UK. The more ties you have, the less time you can spend in the UK before you are considered UK resident for tax purposes.

The ties are:-

1) You have been resident for tax purposes in the UK in the last three years
2) You have a home available to you when you visit the UK
3) You have a spouse or dependent children in the UK
4) You earn income in the UK (note that rental income is considered to be “un-earned”)

If you score all four points you will be classed as UK resident for tax purposes if you spend more than 16 days in the Country in any rolling 365-day period.

If you score three points you will be classed as UK resident for tax purposes if you spend more than 45 days in the Country in any rolling 365-day period.

If you score two points you will be classed as UK resident for tax purposes if you spend more than 90 days in the Country in any rolling 365-day period.

If you score one or zero points you will be classed as UK resident for tax purposes if you spend more than 180 days in the Country in any rolling 365-day period, providing that neither of those stays extend beyond 90 days.

Two other very important rules are:-

1) Any tax benefits will be reversed if you become resident for UK tax purposes within 5 complete tax years of gaining benefit from being non-resident.

2) You only become none resident during your first full tax year. This means that you must be resident before April and the tax benefits will not commence before 6th April. For example, if you become resident in January and sell a UK property in March of the same year then you would be taxed as a UK resident. However, if the sale is not completed until May of the same year you would be taxed as a non-resident.
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Reply to the comment left by Carol T at 01/06/2017 - 12:54
Hi Mark
Just a quick update from me. Thanks so much for replying to my question back in May 17 - you may want to re-read my post from then before going any further. I'm delighted to say we did move to Barbados in August 17 and I have much improved health. Although health is the main reason for being here, saving some CGT would be a very welcome bonus. I believe that I am very clearly non-resident since August 17 and HMRC have accepted my new location.
As mentioned I have 5 rental properties in my sole name and would like to be free to return to the UK, health permitting, after 5 or 6 years if possible. I have a question about the 5 year rule.
In order to minimise the time I have to be abroad, can I sell them at any time during the 5 complete tax years (which start on 6/4/18), or do I have to sell them all during the first complete tax year (18/19) and then be away for the remainder of the 5 tax years? In other words, is it 5 years after I sell the final property or just 5 years in total?
My ideal would be to sell one property a year because putting 5 on the market this April would be a bit overwhelming and risky. But perhaps if I do decide to sell one a year, I would not be able to become UK resident again for 10 tax years?

Reply to the comment left by Fiona Stacey at 16/01/2018 - 18:57
Hi Fiona

I’m glad your enjoying Apain and that you’re in good health.

Just because you are non resident for CGT purposes in the U.K. does not mean you will not pay any in Spain. I strongly recommend you check that. I do not advise on Spanish tax law.

I know that not a direct answer to the question you asked but I think it needs to be your priority to look into the point I have raised. You may even have to pay more CGT in Spain than you would in the U.K.

Hi Mark
I'm not the Spain person. Mine is the top article which starts ''following a brain haemorrhage''. The only two countries involved are the UK and Barbados.
It's just a question about how the 5 year rule works in practice.
Hope you are enjoying Malta!

Reply to the comment left by Fiona Stacey at 16/01/2018 - 19:30
Hi Fiona

You are considered to be a temporary non-resident for your first 5 tax years as a non-resident. If you return to the UK within that 5 year period, any non-resident tax benefits you had claimed would be repayable.

Providing you remain non-resident for at least 5 years, it makes absolutely no difference whether you claimed non-resident CGT rates at the beginning of your first full year or the end of your 5th full year. If you were to return to the UK in year six no additional CGT would become payable.

It is a common misconception that the five year clock starts again every time you claim non-resident CGT rates.

I know this will be the answer your're looking for and I have had it double checked before posting this comment.