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Changes affecting non-residents investing in UK property

A number of changes to the way non-residents that hold UK land and property are taxed have been published in the draft legislation for the Finance Bill 2018-19.

Paul Fay, Partner, Corporate Tax
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Key points
  • Non-residents companies and individuals have been subject to UK Non Resident Capital Gains Tax (NRCGT) on disposal of UK residential property since April 2015. From April 2019 disposal of commercial property will also be taxed.
  • The new rules will also apply to disposal by non-residents of shares in UK property rich companies. The rules are complex, but broadly this catches disposals of 25% or greater shareholdings which derive at least 75% of their value from UK land (properties used in at trade can be exempted)
  • Widely held non-resident companies are currently outside the scope of NRCGT will be brought into the scope of the new rules
  • Non-UK resident companies will be charged corporation tax on their gains
  • There is a rebasing at April 2019 for assets coming into the regime for the first time.  Assets already caught by the current NRCGT continue to be rebased at April 2015
  • As NRCGT will now apply, the existing ATED gains tax will be abolished

In another proposed change, from April 2020 non-resident companies investing in UK property will become subject to corporation tax on their profits rather than income tax as at present. This means that any avoidance provisions such as Corporate Interest Restrictions will apply.

The proposed changes are quite wide ranging and could have a major impact on non-residents with UK property interests non-resident landlords should consider the potential impact of the changes and whether any action is required.

Our View

Whilst this will increase tax costs for non-resident landlords which may discourage investment into UK property, in principle it seems reasonable that UK and non UK investors are taxed on a similar basis. It is however unfortunate that many changes impacting non UK investors have been introduced in a piecemeal way over a number of years rather than as one set of cohesive changes.

For more information on how we can help you, please contact your usual Crowe advisor.

Contact us

Paul Fay
Paul Fay
Partner, Corporate Tax