The government announced in the 2013 Autumn Statement that it intended to introduce a capital gains tax (CGT) charge on the disposal of UK residential property by non-residents with effect from April 2015. The details of the proposal were outlined in a consultation document published on 28 March and are summarised in our factsheet here.
Moore Stephens also made representations in response to the consultation, which are available here.
This proposal followed the introduction from 6 April 2013 of the ATED (Annual Tax on Enveloped Dwellings) regime under which a CGT charge can apply to UK residential property owned by a non-resident company where the property is valued at more than £2 million (a limit that is due to fall to £500,000 by April 2016). Under current legislation, other non-UK residents do not pay CGT on disposals of UK residential property or any other UK assets (unless the sale is part of a trade being carried on in the UK). The consultation document indicated that the government intended to extend CGT to non-UK residents (whether individuals or companies) holding UK residential property directly, irrespective of the value. The charge would also apply to disposals of residential property by partnerships and trusts where a partner or trustee was non-resident.
The document indicated that the government did not intend pension funds and other widely owned collective investment funds to be brought within the new charge. It has now accepted that widely held companies should be treated in the same way, and the charge on companies will therefore apply only to closely held companies where, effectively, the company is a vehicle for investment by a single individual or a small group of individuals. Changes will also be made to accommodate arrangements where institutional investors use partnerships as part of the investment structure.
The government will publish a fuller response in the Autumn.
Private client tax team
Private client tax