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Non-residents brought fully into UK property tax net

The draft Finance Bill 2019 introduces new rules on how non-UK residents are taxed on gains made on UK residential and non-residential property.

Both direct and indirect disposals by non-UK residents of UK property will be subject to the new tax rules. A direct disposal for example would be a sale of property. An indirect disposal would be a disposal by an entity which derives 75% or more of its value from UK land. For example, selling shares in a company of which its value is made up of 75% ownership of UK land.

Under the draft Finance Bill, from 6 April 2019 any gains made by non-residents on such disposal will be subject to capital gains tax. This only brings those who were previously exempt for being non-resident inside the tax bracket; those who are exempt for other reasons such as overseas pension schemes will remain exempt. The capital gains tax will be payable within 30 days all such disposals being completed.

Some exemptions apply in respect of indirect disposals where the property is held for the purpose of a trade.

This will not apply to companies, who do not pay capital gains tax on gains. From 6 April 2020 rental income for non-UK resident companies that receive UK property income will be charged corporation tax instead of income tax.

Top Tip Start discussing potential UK property disposals with experts as early as possible in the transaction. You should review any property-owning structures as the tax laws have changed significantly in the last few years.

For property advice please contact Chris Sykes, Head of Property. For tax advice please contact Graeme Perry, Head of UK and Cross Border Tax.