Publish Date

Jul 24, 2018

Non-resident Investors in Real Estate

A&M Tax Advisor Weekly

In a surprise announcement at the November 2017 Budget, the UK government announced its intention to tax gains arising on the disposal of commercial real estate from April 2019. Additionally, it was confirmed that following an earlier consultation, non-resident companies with UK property rental business would be subject to corporation tax (rather than income tax as is currently the case) from April 2020.

On 6 July 2018, the government published the draft provisions for inclusion in the Finance Bill 2018-2019 containing the detailed rules for both of these measures. They also provided their feedback in respect of the responses received from the real estate industry and advisory bodies to the consultation exercise that had taken place in respect of the taxation of gains.

In this edition of Tax Advisor Update, Jonathan Hornby reviews the proposals and provides a timely reminder of the sweeping changes set to hit non-resident investors over the next two years.

Capital gains on disposal

As anticipated the key principles are in line with those announced in November. To recap, these are as follows:

• Disposals of either residential or commercial property taking place from April 2019 will be taxable largely on the same basis as residents are currently taxed;
• The proposals extend to also apply to indirect disposals where property rich entities are disposed of (those which derive at least 75 percent of their value from UK real estate);
• Optional rebasing to April 2019 market values for both direct and indirect disposals;
• Companies will be subject to corporation tax on chargeable gains arising whereas other taxpayers will be within the scope of Capital Gains Tax.

Whilst within the space constraints of this article it is not possible to consider every minutiae of the rules there are a number of points of significance that are worth examining in further detail.

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