23 November 2017
Yesterday in the 2017 Autumn Budget, the Chancellor announced that from April 2019, tax will be charged on gains made by non-residents on disposals of all types of UK immovable property, extending existing rules that apply only to residential property.
For years, non-resident property investors have escaped taxation on gains made on disposal of UK property. In 2015, the ‘tax-free’ status was removed from residential properties but continued to apply to commercial investments.
The new rules will apply a single, unified regime to both UK residents and non-UK resident investors. There will be a valuation ‘rebasing’ of interests in UK commercial properties held by non-residents from April 2019 (so historic gains will not be subject to the new tax); with an option not to apply these rules if rebasing is set to give rise to a worse result.
The new rules will apply to both the direct disposal of UK property, and also the disposal of indirect interests in UK property. This will include the sale of a ‘property rich’ company by a person (or connected persons) who have at least a 25% interest in that company. A ‘property rich’ company will broadly be one where 75% or more of its gross value at disposal is represented by UK property.
Another key announcement was the confirmation that the government intends to go ahead with their proposal to bring non-resident companies within the scope of corporation tax from April 2020.