Glenn Cassidy, Senior Tax Consultant at Equiom outlines some important changes to the taxation of UK property, which could affect non-UK residents who own a property in the UK.
Since April 2013 there have been a number of key changes to the way non-UK resident owners of UK residential and commercial property are taxed.
Most recently, changes to the UK Inheritance Taxes Act, effective April 2017, mean that holding UK residential property through an offshore entity will no longer provide the company’s non-UK domiciled shareholder with UK inheritance tax (IHT) protection in respect of the property held. This is a very significant change which will leave such shareholders with substantial UK IHT exposure which they have not previously experienced. Advice should certainly be sought by those caught by this change.
In addition to the above, 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 Capital Gains Tax (CGT) or Corporation Tax (CT), meaning that non-UK residents will be liable for CGT on both residential and commercial property, owned by individuals and trusts and CT for companies. The charges would also apply to disposals of substantial interests in entities holding UK property.
Announcements in the UK budget
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 final legislation received Royal Assent in March 2019 before becoming law in April 2019.
New tax rate for corporate landlords
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). Rates of CT are expected to be reduced to 17% by this point in time.
This will also result in differences to the way in which corporate landlord tax is calculated and returns are filed.
The April 2019 tax changes are now in effect, so UK property owners should be aware that they may have additional tax liabilities and obligations on reporting. Corporate landlords should also prepare for filing corporate tax returns after April 2020.
If you have any concerns about these tax changes or your obligations as a non-UK resident, please contact Glenn Cassidy.
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.