From April 2019, the Treasury is proposing that gains made on any disposal of UK land and buildings by non-resident individuals or companies will be subject to UK tax. This is an extension of the existing provisions which currently apply only to disposals of UK residential property.
The rules only apply to gains made from April 2019, and for the purpose of calculating the gain or loss on sale, HMRC are allowing original costs of acquisition to be substituted by the April 2019 market value, and so it makes sense to obtain an independent valuation as close to this date as possible. Should this valuation actually result in more tax becoming due on a future sale compared to using the original cost, then HMRC will allow the taxpayer to choose whichever method produces the least amount of tax.
The proposed new rules apply not only to non-residents disposing of UK property directly but also to the disposal of interests in an entity, such as shares in a Ltd company, that hold UK property where certain conditions are met. These types of disposals also come with obligations for UK advisors involved in the transaction to report it to HMRC, so taxpayers and advisors alike will need to have an awareness of these new rules.
The timescale for reporting disposals and payment of tax under this regime is only 30 days, which is a tight timeframe, so taking advice before the transaction is of vital importance.
Although the legislation is expected to come into force from April 2019, an anti-avoidance rule is already in force, so it is possible that any transaction being entered into before that date is already subject to the UK tax.
Should you require any further information regarding this please get in touch with Jill Walker (firstname.lastname@example.org) or your usual AAB contact so we can provide further detail.