Tax changes for UK property held by non-UK residents
10 April 2019
Change from 1 March 2019
The deadline for filing a Stamp Duty Land Tax return in England and Northern Ireland was shortened from 30 days to 14 days for transactions with an effective date on or after 1 March 2019.
Changes from 6 April 2019
- The existing charge to tax on gains realised by non-UK residents on UK residential property will be extended to ALL UK properties. Specifically the following will now be brought into charge:-
- Gains on commercial property; and
- Gains on residential property owned by diversely held companies. (Previously, non-resident CGT did not apply to residential properties owned by companies that were diversely held, i.e. that would not have been close if UK resident).
- Gains on disposals by non-residents of ‘assets deriving 75% of their value from UK property’ – typically shares in companies owning UK property - will be brought into charge. However:-
- The non-resident person must have a ‘substantial indirect interest’ in the property; being a 25% interest at any time during the previous 2 years;
- No gain arises where all, or nearly all, the underlying UK property is ‘used for trade purposes';
- A separate regime will operate for ‘property rich’ collective investment vehicles. In brief, the default position is that the collective investment vehicle is treated as if it were a company, but it can elect to be considered transparent so that the underlying investors are deemed to have realised the gain.
- For properties and assets first coming into charge on 6 April 2019 the gain will be, in most cases, calculated with reference to the increase in value from 5 April 2019. An election can be made to use the total gain (or loss) since acquisition. (Unlike the 2015 transitional rules, it will not be possible to use time apportionment to calculate the post April 2019 gain, so a 5 April 2019 valuation will be required.)
- The ATED-related capital gains tax which has applied to some residential properties owned by companies since 2013 will be abolished. (No gain will arise for ownership prior to rebasing in April 2015 even if the dwelling was subject to an ATED charge prior to that date.)
- UK property gains realised by non-UK resident companies will be subject to corporation tax instead of CGT. Brought forward capital losses (under NRCGT or ATED-related rules) remain available for corporation tax purposes.
- In ALL CASES, payment on account of non-resident CGT must be made within 30 days of completion - it will no longer be possible to choose to delay paying CGT until filing a self-assessment return. (Note: HMRC has indicated to us that these reporting and payment obligations do not apply to non-resident companies from 6 April 2019, as the amended schedules refer only to CGT and not corporation tax.)
Changes from 6 April 2020
- Non-UK resident companies that carry on a UK property rental business or have other UK property income will be liable to corporation tax instead of income tax – a year after their UK property gains become subject to corporation tax. Unused income tax losses are carried forward for corporation tax purposes.
The definition of ‘UK related company’ for group relief purposes is extended to include non-resident companies within the scope to corporation tax so that such companies can benefit from group relief from 6 April 2020. (The change to group relief is backdated to 5 July 2016 so as to also cover non-resident property dealing/development companies brought into corporation tax by the changes to the Transactions in Land anti-avoidance provisions on that date)
- The requirement to report and pay CGT within 30 days of completion is extended to disposal of UK residential property by UK residents where a gain has accrued – i.e. no return required where gain wholly relieved by PPR. (Note: Again HMRC has indicated to us that these reporting and payment obligations will not apply to companies without additional legislation being introduced).
Other proposed change
The Government proposes to introduce a 1% SDLT surcharge for purchases of UK residential property by non-resident individuals and non-natural persons. The proposal is currently under consultation, and no proposed commencement date has been announced.
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