In a surprise announcement at the November 2017 Budget, the UK government announced its intention to tax gains arising on the disposal of commercial real estate from April 2019. Additionally, it was confirmed that following an earlier consultation, non-resident companies with UK property rental business would be subject to corporation tax (rather than income tax as is currently the case) from April 2020.

 

On 6 July 2018, the government published the draft provisions for inclusion in the Finance Bill 2018-2019 containing the detailed rules for both of these measures. They also provided their feedback in respect of the responses received from the real estate industry and advisory bodies to the consultation exercise that had taken place in respect of the taxation of gains.

 

Jonathan Hornby, of Taxand UK, reviews the proposals and provides a timely reminder of the sweeping changes set to hit non-resident investors over the next two years.

 

Discover more: Non-resident investors in UK real estate

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Taxand's Take

Given that draft legislation is yet to be prepared addressing the most complex aspects of the non-resident capital gains charge (i.e., those concerning CIVs) it would perhaps have been a better idea to defer the introduction of the new rules until 2020. This would also have had the benefit of aligning their commencement with the changes to the taxation of income. We are potentially left with the anomalous situation in 2019 where a taxpayer that disposes of an asset needs to file a corporation tax return to report the gain on the disposal and an income tax return to report their income.

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Article tags

International Tax | Real Estate Tax | UK

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