A consultation was released as part of the Autumn Budget with plans to extend the rules on the taxation of disposals on UK properties for non-residents.
CURRENT RULES
Prior to 6 April 2015, it was possible for a non-resident person selling a UK property to escape a UK tax charge.
In 2015, the government changed the rules so that a sale of a residential property would be subject to capital gains tax (CGT), but only on the increase in value of the property from the date the new rules took effect.
PROPOSALS
The government has since announced that they are looking to extend this rule to all UK properties such that disposals of commercial properties will also become subject to CGT from April 2019.
As with the 2015 changes, provisions will be put in place so that properties will be rebased as at April 2019 so that CGT will only be levied on gains accruing from the commencement date of the new rules.
There will also be the option to elect for the gain to be calculated based on the ‘full calculation’ i.e. from the date it was acquired rather than rebasing. This could be of benefit where the property has a lower value at April 2019 than its acquisition value.
The rules will also be extended to include indirect disposals of properties via a company, partnership or property unit trust. For these rules to kick in, the non-resident investor must hold at least a 25% share in an entity which derives 75% or more of its gross asset value from UK property.
The upside of the new legislation is that any CGT or corporation tax losses realised on these disposals will be available for offset against other property/company gains.
ADMIN
A return will need to be filed and tax paid within 30 days of the disposal. If the individual is already registered for self-assessment, however, the tax can be deferred until the normal payment date.
In the case of a company, it will need to register for self-assessment and file a return based on a one day accounting period unless it is already registered for UK corporation tax.