En Voyage Issue#16 Flickbook

Business
UK TAX ON THE SALE
OF UK PROPERTIES
OWNED BY NON-UK
RESIDENTS
BY NATALIE CHAMBERLAIN, ASSOCIATE DIRECTOR, LTS TAX LIMITED
HM Revenue and Customs
('HMRC') are implementing
significant changes which
will subject gains realised
on the disposal of all UK real
property made by non-UK
residents to UK tax. This will
include commercial property;
retail, offices, factories and
agricultural land.
Prior to April 2019, only gains
arising on the disposal of UK
residential property made
by non-UK residents were
subject to UK tax, with gains
arising upon the disposal of UK
commercial property falling
outside the UK tax charge.
Under the new regime, non-
UK residents disposing of any
UK property will be subject to
UK Capital Gains Tax ('CGT')
on any gain arising. Non-
UK resident companies will
be liable to Corporation Tax
('CT') on any gains arising.
THE RATES OF TAX
For individuals the applicable
CGT rates will be the same as
for UK residents and will depend
on the level of other UK taxable
income and whether the disposal
is of commercial property
(currently 10% or 20%) or of
residential property (currently
18% or 28%). Non-residents
will be entitled to the normal
CGT reliefs and exemptions i.e.
the annual exemption which
will be £12,000 for 2019-20.
Non-resident companies,
which were previously subject
to non-resident Capital Gains
Tax ('NRCGT') at 20% in respect
of gains arising on the disposal
of residential property, will from
April 2019 be subject to CT on
the disposal of all UK property.
The applicable CT rate will be
the same as for UK resident
companies which is currently 19%
but falling to 17% in April 2020.
For disposals by non-UK resident
individuals or trustees of nonresidential
property, there will be
a rebasing option so that only
gains that accrue post 6 April
2019 will be exposed to CGT. For
companies subject to CT on their
property gains, the rebasing date
is 1 April 2019. There will also be
an option to calculate the gain or
loss using the original acquisition
cost of the asset if this is beneficial.
For companies that become
UK resident post April 2019,
the uplifted base cost will
continue to apply, so as to
not prevent non-UK resident
companies from “on-shoring”.
INDIRECT INTERESTS
Indirect interests in UK property
will also fall within the new
regime. The indirect interest rules
will apply where an individual
makes a disposal of an entity
that derives 75% or more of its
gross asset value from UK land.
There is an exemption for any
investor who owns less than a 25%
interest. A disposal of an indirect
interest will most commonly
occur when shares in a company
holding UK property are disposed
of. However, interests held in
partnerships, trusts or UK Real
Estate Investment Trusts by way
of options or other rights over
property will also be taxed.
There will be a trading exemption
for entities that are trading before
and after the disposal where
the land is used in the trade.
LOSSES
Losses arising to non-UK resident
companies under the new rules
can be offset against any other
company gains. Losses arising
to non-resident individuals
and trustees can be offset
against other property gains.
REPORTING A DISPOSAL
TO HMRC
For companies, the disposal
needs to be reported in the annual
CT return and tax paid within
nine months of the end of the
accounting period. For individuals
and trustees, disposals will need
to be reported to HMRC within
30 days of completion, with a tax
payment on account also being
due on that date in most cases.
However, if the investor
is already within the self
assessment regime, the disposal
can instead be reported on
their annual UK tax return.
ATED
Annual Tax on Enveloped
Dwellings (ATED) related CGT,
which has applied to highvalue
residential properties
owned by companies since
2013, will be abolished with
effect from April 2019.
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