UK to extend capital gains tax for non-residents to all UK real estate
UK commercial property disposals are due to come under the non-resident CGT regime from 6 April 2019.
Prior to April 2015, non-UK residents (individuals, corporate or trustees) were not subject to UK capital gains tax (CGT) on disposal of UK real estate, whether residential or commercial. Non-resident CGT was introduced for non-residents disposing of residential property from April 2015.
It was confirmed in the 2018 Autumn Budget that the non-resident CGT regime is to be extended to UK commercial property disposals from April 2019.
Draft legislation has been published on proposed changes to the CGT regime for non-residents. The changes, which are due to take effect from 6 April 2019, include the following:
- UK commercial properties will now fall within the charge to tax, in addition to residential properties.
- Disposals of shares in ‘UK property rich’ companies will be taxed.
- Annual tax on enveloped dwellings (ATED)-related CGT will be abolished, in order to simplify the regime (at least in theory).
Commercial property includes business premises, care homes and student accommodation.
A ‘UK property rich’ company is one that derives at least 75% of its gross assets value from UK real estate.
The non-resident CGT will apply at the same rates of tax that a UK resident would pay. Corporation tax rates for non-resident companies (currently 19%, reducing to 17% from 2020); 20% for non-resident trustees, and 10% or 20% for individuals, depending on whether the individual has any basic rate band remaining.
It is also proposed that non-UK resident companies with UK rental income will be subject to corporation tax (rather than income tax, as is currently the case) from April 2020. This means that net rental profits within companies will be subject to corporation tax at 17%, rather than income tax at 20%.
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