This tax year HMRC has introduced rules that seek to bring almost all non-resident owners of UK land within the scope of UK tax on their gains. Under the new regime, effective from 06 April 2019, where a seller (regardless of their tax residence) generates a gain from the disposal of UK property then:
• individuals and trustees are subject to capital gains tax (NRCGT, at up to 28% for residential property and up to 20% for commercial property); and
• companies are subject to corporation tax (currently at 19%).
Certain non-residents also for the first time became liable to UK tax on gains generated from the disposal of shares in “property rich entities”. This new charge applies to sales of shares in companies that derive at least 75% of their value from UK property.
The new regime also includes targeted anti-avoidance provisions to counteract amongst other issues attempts to restructure property holdings to artificially defeat the property rich test. There has also this year been a targeted campaign of “nudge letters” undertaken by HMRC against non-resident property owners and their tenants, as well as the introduction of accelerated submission and payment dates for CGT returns from April.
In contrast, rebasing allowances were introduced for both residential and commercial property holdings of non-residents which can provide the ability to ring fence and exclude some historical gains.
The general direction of travel in recent years has seen an increase in the tax and compliance burden on existing UK property structures and in this light, investors and their professional advisers must review and determine the suitability of existing vehicles and structures. The scrapping of the scheduled Corporation Tax rate reduction and the rebasing opportunities available currently means that there exists currently a narrowing window of opportunity.
At Trident Tax we will be considering some of the above issues further at the next session of our regular Breakfast Tax Club held in Bedford Square WC1, following our last event which focused on some of IHT issues arising for overseas property investors in the UK. At our next event we will also discuss our diagnostic service which is intended to assist in navigating some of the practical client issues currently being faced when determining the suitability of existing UK property structures.
If you would like to receive an invitation to the next session of the Breakfast Tax Club once announced or receive further information on our anonymous diagnostic service then please email diagnostic@tridenttax.com or contact Stephen Davies directly on 07710 319690.