Changes affecting non-residents investing in UK property

A number of changes are being made to the UK’s tax rules that will affect UK non-residents with property interests in the UK.

Capital gains
At the moment, UK non-residents only face a tax charge on gains from the disposal of UK property if the property is residential (and, even then, not in all circumstances). But this is changing.
From 1 April 2019 for companies, and from 6 April 2019 for other taxpayers, the UK Government proposes that all capital gains accruing on disposals of interests in UK property by non-residents will become taxable. This means that, as well as gains on commercial investment property being chargeable to tax, some previous exclusions in relation to residential property will be removed. In addition, there will be a charge on disposals of interests of 25% or more in companies and other entities that derive 75% or more of their gross asset value from land.
For assets drawn into the tax net for the first time by these changes, the gain will be calculated by reference to the market value at April 2019.
Gains made by companies will be chargeable to corporation tax. Gains made by individuals, trusts and personal representatives will be chargeable to capital gains tax at the same rates as apply to UK-resident taxpayers.
There are some rigorous compliance requirements to meet. For example, the transactions must be reported within 30 days of completion and in certain cases the tax must be paid by the same date.
Rental income
Some changes to the tax rules around rental income are also on the way. From 6 April 2020, it is proposed that non-UK resident companies that carry on a UK property rental business or have other UK property income will be brought within the charge to corporation tax (17% from 1 April 2020), rather than paying income tax (currently 20%).
This may be beneficial if the corporation tax rate remains below the income tax rate. However, for larger companies, the change means that corporation tax rules restricting the use of brought forward losses and the deduction of interest expense will apply.
If you would like any help or advice in responding to these tax changes, please feel free to contact Steve Wheeler.

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