Non-resident CGT applies in two regimes. The direct-disposal regime (extended to UK residential land from 6 April 2015, extended to non-residential land from 6 April 2019) catches every non-resident sale of UK land. The indirect-disposal regime (introduced from 6 April 2019) extends the same charging principle to disposals of shares or other interests in companies that derive 75% or more of their value from UK land, provided the disposing non-resident holds (or has held in the past two years) a 25% or greater interest. This page covers the indirect-disposal leg: when it applies, how the 75% richness test and 25% interest test interact, the trading-company exemption, the Schedule 4AA rebasing to 5 April 2019, the 60-day reporting machinery, and the planning considerations for non-resident shareholders exiting UK property SPVs.

The statutory architecture matters because outdated competitor coverage often still cites TCGA 1992 sections 14B to 14H (the FA 2015 framework, which was repealed by Finance Act 2019). The current regime lives at TCGA 1992 s.1A (charging provision), Schedule 1A (substantive definitions including indirect disposals), and Schedule 4AA (rebasing computation). One anonymised scenario (Carla, a non-resident Italian shareholder selling her 33% interest in a Manchester BTL SPV in 2027) carries the figures.

What "indirect disposal" means

For a direct disposal, the non-resident is selling UK land (a freehold, a leasehold, or an interest in UK land such as a partnership share where the partnership holds UK land). NRCGT under s.1A catches every such disposal regardless of the residence of the seller or whether tax is due.

For an indirect disposal, the non-resident is selling shares or other corporate interests. The shares themselves are not UK land. But where the company being sold holds UK land in significant proportion (the 75% test) and the seller has a significant interest in the company (the 25% test), the indirect disposal is brought within NRCGT as if it were a direct disposal of an interest in UK land. The economic logic: a non-resident with a 60% interest in an offshore SPV holding UK BTL property can transfer beneficial ownership of the UK property by selling the SPV shares rather than the underlying property; the indirect-disposal extension closes that economic-equivalent route.

Three structural points anchor the regime:

  • The disposal is by a non-resident (the residence of the seller).
  • What is sold is an interest in an entity (shares in a company, units in a unit trust, certain partnership interests).
  • The entity is "property-rich" by the 75% test, and the seller holds a "substantial indirect interest" by the 25% test.

The 75% property-richness test

At the time of disposal, the entity must derive 75% or more of its gross asset value from UK land. The test:

  • Gross, not net. The test uses gross market value of all assets, not the balance-sheet book value and not net of debt. A company with £10m of UK BTL property and £6m of borrowings still has £10m of UK land for the 75% test, not £4m of net property equity.
  • Market value, not book. The test uses current market value of all assets. Companies whose balance sheet still shows acquisition cost on long-held UK property need a market valuation as at the disposal date.
  • UK land defined broadly. Freeholds, leaseholds, interests in UK land held through partnerships and transparent vehicles, and beneficial interests via bare trusts all count. Hotels, BTL portfolios, commercial buildings, agricultural land, development sites all count.
  • Look-through to subsidiaries. Where the disposed entity holds shares in another company (a subsidiary), that subsidiary's assets are brought into the gross-asset computation (consolidated where the subsidiary is wholly or substantially owned; apportioned by interest otherwise). The look-through is in Sch 1A para 4.
  • What does not count. Cash balances, intercompany loans, third-party receivables, intangible assets unconnected with UK land, foreign land.

A SPV with £8m of UK BTL property, £500,000 of cash, £200,000 of debtors, and £300,000 of operating fixtures is 89% property-rich (£8m / £9m) and inside the 75% test. A SPV with £6m of UK BTL property and £3m of cash awaiting redeployment is 67% property-rich and outside the 75% test (until the cash is deployed into property or distributed).

The 25% substantial indirect interest test

The disposing person must hold a 25% or greater interest in the entity at the time of disposal, OR have held a 25% or greater interest at any time in the two years before the disposal. The 2-year lookback is the anti-avoidance teeth: it stops gradual sell-down from circumventing the regime.

The "interest" is measured by reference to:

  • Ordinary share capital held.
  • Voting rights.
  • Economic entitlement to profits and assets on a winding-up.

Where these differ (typically through preference shares or shareholder agreements), the percentage held is normally the lowest of the three.

Connected-persons aggregation. Holdings of persons connected to the disposing individual under the Sch 1A connected-persons rules are aggregated for the 25% test. Spouses, civil partners, lineal descendants and ancestors, sibling holdings, and certain entity-controlled holdings are aggregated. A non-resident individual with 18% and a spouse with 12% together hold 30% and are inside the substantial-interest test even though neither individually meets the 25% threshold.

The 2-year lookback in practice. A 30% shareholder selling 6% in year 1 to drop to 24%, and the remaining 24% in year 2, does not escape NRCGT on the year-2 disposal. At the time of the year-2 disposal, the shareholder held 25% or more at a point within the prior 2 years (in fact at the start of year 1). Both disposals are within scope. The only way to legitimately exit a 25%+ interest outside scope is to sell-down to under 25% and wait more than 2 complete years before any further disposal; a long planning horizon that rarely fits transaction reality.

The trading-company exemption

Schedule 1A Part 2 provides an exemption from the indirect-disposal charge where, at the time of disposal:

  • All of the UK land held by the company is used in a qualifying trade carried on by the company (or by a 51% subsidiary), AND
  • The UK land has been so used throughout the 12 months ending with the disposal.

The exemption is narrowly drawn. "Used in a trade" requires genuine trading activity, not property investment. The classic case is an operating business (manufacturing, retail, services) whose UK premises are owner-occupied: shares in the company can be sold by a non-resident shareholder without triggering indirect-disposal NRCGT even where the company is technically property-rich because of premises value.

Property-investment holdings (BTL portfolios, commercial-let buildings, development sites held for resale) are not "used in a trade" for this purpose. The Pawson-style trading-versus-investment classification developed in IHT case law (Pawson v HMRC [2013] UKUT 050 (TCC), Vigne v HMRC [2018] UKUT 0357) applies in substance to the trading test for the indirect-disposal exemption. Serviced accommodation and short-let operations sit in the grey zone; clear trading status requires substantial service provision, short-stay turnover, active business management and an income profile characteristic of hospitality rather than rental.

Mixed-use cases fail the exemption: any property held partly for investment fails the "all of the UK land" wording. The exemption is binary by company, not pro-rata.

Rebasing to 5 April 2019: Schedule 4AA computational options

Where the share / interest was held on 5 April 2019 (the date the indirect-disposal regime came into force), Schedule 4AA gives the disposing non-resident three computational options for the gain on later disposal.

Default: rebasing to 5 April 2019 market value. The cost of the share / interest is treated as its market value on 5 April 2019. Only the post-2019 gain (disposal proceeds less 5 April 2019 market value) is chargeable. Most common option; appropriate where the share interest appreciated materially before 2019.

Election: straight-line apportionment. The total gain from acquisition to disposal (proceeds less original cost) is apportioned by reference to the holding period before / after 5 April 2019. Only the post-2019 apportioned portion is chargeable. Useful where the share value moved unevenly through the holding period.

Election: compute the full historic gain. The chargeable gain is the full disposal proceeds less original cost. Rarely beneficial; available where pre-2019 losses outweigh post-2019 gains so that the historic computation produces a smaller chargeable amount (or a loss).

The 5 April 2019 market value of the share / interest is the operational sticking point: it requires a contemporaneous or retrospective business valuation. HMRC accepts professional valuations supported by appropriate evidence (DCF model, comparable-transaction analysis, independent valuer report). For SPVs holding identifiable UK property, the valuation usually flows from the property values plus net working capital, less liabilities, then apportioned to share interest. The valuation cost (typically £5,000 to £25,000 depending on complexity) is dwarfed by the tax saving from rebasing on a materially appreciated holding.

60-day reporting on indirect disposals

Every disposal of UK land or interest in UK land by a non-resident triggers a 60-day return and (if tax is due) payment, regardless of whether tax is actually due. Indirect disposals are within the same machinery as direct disposals:

  • File on the HMRC Capital Gains Tax on UK property service within 60 days of completion (the date contracts complete, not contract exchange).
  • The return reports the share / interest disposed, the gain computation (rebasing option selected), the tax due, and any reliefs.
  • Pay the tax within the same 60-day window.
  • The disposal also enters the annual self-assessment return on the SA108 for the relevant tax year, with the 60-day-return tax credited against the SA computation.

UK residents file the 60-day return only where tax is due; non-residents file every time, even for nil-gain disposals or where reliefs eliminate the tax. The "must report regardless of tax due" rule is the operational trap: a non-resident selling a 30% SPV interest at a loss still files within 60 days even though no tax is due.

Worked example: Carla, 33% Manchester BTL SPV exit in 2027

Carla, 47, Italian national, non-UK resident throughout. She co-founded Manchester BTL Holdings Ltd (an English-incorporated SPV) in May 2017 with two business partners, each acquiring a 33% shareholding for £200,000 of equity. The SPV acquired 8 residential BTL properties in Manchester for a combined £3.6m using £1.8m of bank debt and the £600,000 of shareholder equity, plus retained profits over the holding period.

By 28 February 2027 (the disposal date), the SPV's position:

  • UK BTL property (8 units, market value): £4.2m
  • Cash and working capital: £180,000
  • Operational fixtures and other: £120,000
  • Total gross asset value: £4.5m
  • UK land proportion: £4.2m / £4.5m = 93%, comfortably above the 75% test.
  • Bank debt remaining: £1.5m (irrelevant for the gross-asset test)
  • Net asset value: £3.0m, of which Carla's 33% share is £990,000.

Carla sells her entire 33% shareholding to a new investor on 28 February 2027 for £1,400,000 (the buyer paid a small control-block premium to take up the seat). She held 33% throughout (always above the 25% test; the 2-year lookback is immaterial because she has held this level continuously).

NRCGT indirect-disposal applies. 75% test met (93%); 25% test met (33%); no trading exemption (BTL portfolios are property investment, not trade); 60-day return due by 29 April 2027.

Schedule 4AA rebasing. Carla held the shares on 5 April 2019. She elects the default rebasing to 5 April 2019 market value. The professional valuation at that date placed the SPV net asset value at £2.4m (UK property values had risen from 2017 levels but were lower than 2027 valuation, and the SPV had built up retained profits); her 33% share was valued at £792,000 on 5 April 2019.

Gain computation:

  • Disposal proceeds: £1,400,000.
  • Less rebased cost (5 April 2019 market value): £792,000.
  • Less incidental costs of disposal (legal fees, transaction advisor): £15,000.
  • Chargeable gain: £593,000.
  • Less Annual Exempt Amount (2026/27): £3,000.
  • Taxable gain: £590,000.
  • Rate: 24% (residential-character indirect disposal, post-30-October-2024).
  • NRCGT: £141,600.

60-day return. Carla files the return on the HMRC CGT on UK property service by 29 April 2027, reports the indirect disposal, the rebasing election, the £141,600 tax due, and pays.

Annual SA cross-check. The disposal is reported on Carla's 2026/27 SA108. The £141,600 paid on the 60-day return is credited against the SA computation. No additional UK tax arises from the SA filing on this disposal.

Italian-side considerations. Italian capital gains tax applies on Carla's worldwide gains as an Italian resident (currently at 26% on financial-instrument gains). The UK NRCGT paid is creditable under the UK-Italy DTA (Art 24 elimination of double tax). Italian net tax: £153,400 (gross Italian liability at 26% on the gain) less £141,600 UK credit, net Italian top-up around £11,800. Combined UK + Italian: £153,400.

What would have changed without rebasing. If Carla had elected to compute the full historic gain (proceeds £1.4m less original cost £200,000 = £1.2m gain, less AEA = £1,197,000 taxable), the UK NRCGT would have been £287,280. The Sch 4AA rebasing election saves her £145,680 of UK CGT. The Italian side would be lower by the same difference (UK credit is bigger), but the total combined burden would have risen by around £140,000. The rebasing election is the most important single decision on the disposal.

Multi-tier structures and look-through

Many UK property holdings sit inside multi-tier corporate structures: a non-resident individual owns shares in TopCo (often an offshore-incorporated holding company), TopCo owns 100% of MidCo (often UK or another offshore jurisdiction), and MidCo owns the UK property directly or through one or more further subsidiaries.

For NRCGT indirect-disposal purposes:

  • The 75% property-richness test on TopCo's shares looks through to MidCo's and the further subsidiaries' assets, consolidating where TopCo wholly or substantially owns the subsidiary.
  • The 25% test on TopCo measures the non-resident's interest in TopCo, not in the underlying property. A 100% interest in TopCo is a 25%+ interest for the test.
  • Indirect intermediate disposals (selling MidCo shares while retaining TopCo) trigger the test on the MidCo disposal independently.
  • Anti-avoidance Sch 1A para 4(7) targets artificial structures designed to fall outside the look-through; HMRC's investigation appetite on these is high.

Practical consequence: an offshore non-resident holding UK BTL property through a TopCo / MidCo / OpCo stack cannot escape NRCGT indirect-disposal scope by selling at any tier of the stack. The 75% / 25% machinery catches the disposal at whichever level it happens.

Common indirect-disposal misconceptions corrected

"My company is offshore-incorporated so UK NRCGT doesn't apply." Wrong. Incorporation location of the company being sold is irrelevant; what matters is the location of the underlying assets. A Jersey-incorporated, BVI-incorporated, Cayman-incorporated or Luxembourg-incorporated company that derives 75% or more of its value from UK land is property-rich for the test. Non-resident shareholders with 25%+ interest are in NRCGT scope on disposal regardless of where the company is incorporated.

"I'm under 25% so I'm safe." Often wrong. The 25% test aggregates connected persons (spouse, lineal descendants and ancestors, certain controlled entities). A non-resident with 20% individually whose spouse holds 8% has 28% on the aggregation and is inside scope. The connected-persons rules need to be applied before assuming individual sub-25% status is enough.

"I sold down to 20% last year, so I can now sell the rest outside NRCGT." Wrong. The 2-year lookback measures from each disposal date. A year-2 disposal still falls within 2 years of the date the shareholder held 25%+, so still in scope. To genuinely sell outside the substantial-interest test, the shareholder needs to wait more than 2 complete years after the date the interest first dropped below 25%.

"The trading-company exemption applies to my BTL SPV because I run the lettings actively." Wrong. Active management of a rental portfolio is not "trading" for tax purposes; BTL portfolios are property investment, not trade, regardless of management intensity. The trading exemption requires the UK land to be used in a genuine trade (manufacturing, retail, services, hospitality at the Pawson trading threshold). Investment-let portfolios fail the exemption.

"The 60-day return only applies if I'm paying tax." Wrong for non-residents. The non-resident reporting obligation is "every disposal of UK land or interest in UK land regardless of tax position". Loss disposals, nil-gain disposals, and reliefs-eliminated disposals all require the 60-day return from a non-resident, even though no tax is paid. The penalty for non-filing is a £100 initial penalty plus daily penalties from day 90, rising to £300 or 5% of the tax (whichever is greater) at 12 months.

"NRCGT indirect disposal is the same regime as section 14 NRCGT before 2019." Partially wrong. The substantive 75% / 25% test architecture for indirect disposals only came in from 6 April 2019; prior to that, NRCGT was direct-only. The TCGA 1992 ss.14B-14H structure introduced by FA 2015 was repealed by FA 2019 and the regime was rewritten into s.1A + Schedule 1A + Schedule 4AA. Outdated competitor coverage still citing the old section numbers may also be relying on the old direct-only scope; verify any pre-2019 source against the current statute.

How indirect disposal fits into the wider NRCGT regime

NRCGT is now a single charging provision (s.1A) with two limbs:

  • Direct disposal: non-resident sells UK land. Inside scope from 6 April 2015 for residential, 6 April 2019 for non-residential. Rebasing to those respective dates. The companion NRL scheme guide covers the operational landscape for non-resident landlords more broadly.
  • Indirect disposal: non-resident sells shares in a property-rich company (covered on this page). Inside scope from 6 April 2019. Rebasing to 5 April 2019.

Both limbs run the same 60-day reporting clock, the same residential / non-residential rate split (18% / 24% from 30 October 2024), and the same AEA availability for individual non-residents.

For the typical non-resident UK property investor, the practical questions are: (1) what UK property do I hold (directly or through corporate structures), (2) what NRCGT regime applies on each potential disposal route, and (3) what rebasing and reporting machinery applies. The indirect-disposal extension closed the structural gap that previously allowed offshore-SPV-share-sales to escape UK CGT on what was economically a UK property disposal; from 6 April 2019 the substance follows the form.

For non-resident investors planning an SPV exit, the s.10A 5-year temporary non-residence interaction (covered in our 5-year recapture page) is the additional layer: a temporary non-resident shareholder making an indirect disposal during the 5-year window faces both NRCGT at the time of disposal (post-2019 rebased portion) and s.10A recapture on the return year (pre-2019 portion). The combined coverage matches the direct-disposal position; planning around the 5-year boundary applies equally to indirect disposals.