Significant changes for non-resident property owners

Significant changes for non-resident property owners

Significant changes for non-resident property owners

Since April 2015, non-residents have been liable to UK capital gains tax (“CGT”) on the disposal of UK residential properties.   

New rules introduced on 6 April 2019 have extended the scope of UK CGT for non-residents. From this date, disposals of all UK property (both residential and commercial) are subject to UK CGT. 

The new rules also extend to indirect disposals i.e. the disposal of shares in a “property rich entity”. Non-residents owning UK property via a company may therefore be caught by the new provisions.

Who is affected?

  • Non-residents are subject to UK CGT on disposals of all UK property.
  • Non-residents disposing of an interest in a “property rich entity” are subject to UK CGT, provided any exemptions from the charge do not apply.
  • Non-resident companies are subject to UK Corporation Tax (currently 19%) on chargeable gains from UK property.
  • Individuals who have interests in UK property and are considering leaving the UK following the Brexit ruling. This now adds a further dynamic to any decision. 

Gains realised on disposal of UK commercial properties and indirect disposals can be calculated with reference to the market value of the assets at 5 April 2019, alternatively the gain can be calculated based on the whole period of ownership. Disposals must be reported to HMRC within 30 days of the disposal through a non-resident capital gains tax return.

Did you know?

From April 2020 non-resident landlord companies receiving UK rental income will move into the UK Corporation Tax regime (currently subject to income tax). HMRC are looking to ensure that non-resident landlords are taxed in the same way as UK property companies.

What will this mean?

Where UK property is owned, discussions will need to be had to understand how the changes impact you or your company’s tax position, and any additional reporting requirements you may now have with HMRC. 

For example, a gain of £500,000 made by a non-resident individual in respect of the disposal of a UK commercial property could trigger a £100,000 capital gains tax charge, where previously this would have been £nil.

If you would like further information or advice on these changes, please contact your team at Creaseys on 01892 546 546.