Navigating the landscape of UK property tax changes

Friday 07 December 2018

Equiom’s recent tax seminar hosted jointly with global real estate services provider, Savills, centred around some important changes to the taxation of UK property, which could affect Isle of Man residents who own a property in the UK. To summarise the main points, Glenn Cassidy, Senior Tax Consultant provides some informative answers to the questions on everyone’s mind.

Q1: What is the current tax situation for local owners of UK residential and commercial property and how has that changed over the years?

Prior to April 2013, there was no UK Capital Gains Tax (CGT) payable by non-UK residents on disposal of UK residential property, but the charge has slowly crept in over the last five years with more and more owners of UK property now affected.

In 2013, non-UK resident companies realising gains on disposals of ‘expensive’ (worth more than £500,000) UK residential properties became liable for a CGT charge.

Then in April 2015, the UK Government announced that CGT would apply to all non-UK residents realising gains on disposals of all UK residential property. This extended the scope to include individuals, trusts and companies with UK residential property both below and above the value of £500,000.

In November 2017, a consultation paper on the taxation of gains for non-UK residents on UK property was published and in it the UK government announced its intention that, effective April 2019, any gains realised on the disposal of all UK property will be subject to UK CGT, meaning that non-UK residents will be liable for CGT on both residential and commercial property, owned by individuals, trusts and companies. The charge would also apply to disposals of substantial interests in entities holding UK property.

Q2: Was there anything announced in the recent UK budget with respect to these changes and what’s next?

On UK Budget Day, 29 October 2018, the UK Government announced that it intended to implement CGT on gains for non-UK residents on UK property exactly as was suggested in the consultation document. At this time, they presented the final version of the legislation which had a few minor amendments from the original draft. The next step will be for the final legislation to seek Royal Assent in March 2019 before becoming law in April 2019.

Q3: Something was mentioned about a new tax rate for landlords as well. What is this and when will it come into effect?

Currently, non-UK resident companies are subject to UK Income Tax (IT) at 20%. It was also announced in the consultation that from April 2020, these companies will be subject to UK Corporation Tax (CT).

This will result in differences to the way corporate landlord tax returns are filed.

Q4: Is there anything people should do now to prepare for the April 2019 and 2020 changes?

People should most definitely review their UK commercial property assets ahead of April 2019. Our event partner, Savills has advised its clients that if there are planned works, such as the renewal of a lease or repair works, which will increase the value of the property, then it would be sensible to undertake them before April 2019. Equally, if you are planning a sale of your commercial property and contracts are able to be exchanged before April 2019, then this would be sensible.

I would also urge corporate landlords to prepare for filing a corporate tax return after April 2020, including investigating any changes to the way they need to compute their taxes for this return.

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This article has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The article is not intended, and should not be construed as, specific tax advice and cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained herein without obtaining specific professional advice. Please contact Equiom to discuss these matters in the context of your particular circumstance. Equiom Group, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this article or for any decision based on it.