Tax Guide: non-residents and real estate budget 2017
The Government intends to tax capital gains realised by non-UK resident investors in UK property. This is scheduled to have effect from April 2019. Very broadly:
- Tax will be charged on gains made by non-residents on disposals of UK commercial property.
- Non-UK companies and other bodies corporate will become subject to corporation tax, individuals will become subject to capital gains tax.
- Tax will also apply to indirect disposals of interests in UK commercial or residential property. The charge will apply on the disposal of an interest in a 'property rich' vehicle, being an entity which derives, directly or indirectly, 75% or more of its value from UK land.
- The new indirect charge will not apply to investors which hold (when taken together with relevant persons) less than 25% of the vehicle
- The 25% threshold will have regard to the period of five years prior to disposal.
- In the context of the existing charge to tax on UK residential property, the exemption for property held by widely-held companies will be removed.
This is set to be a significant and dramatic change to the regime. Currently, only direct disposals of residential property are usually within scope.