UK Property Tax Changes for Non-Residents – HMRC Provide Some Simplification

From April 2019 new tax rules will apply to the disposal of all UK land and property by all non-UK resident individuals, companies, personal representatives and trusts. The summary of the current and proposed new rules is set out below:

 

 

HMRC consulted on the proposed changes and following the feedback received, have made simplifications to their original plans:

Third-party advisors are no longer required to report transactions to HMRC which they have reason to believe have not been reported by the non-resident seller.  This will be appreciated, in particular, by the legal profession who quite rightly had concerns about the burden this would put on them.

 

1. 1. When disposing of shares in a “Property Rich Company” it has been accepted by HMRC that obtaining valuations at April 2019 may be difficult and therefore taxpayers can use original cost instead provided this does not create a loss position.
   2. In determining whether the shareholder has a 25%+ interest in a Property Rich Company, the shareholdings of relatives are taken into account. Originally all relatives were included but this will now be limited to spouses, parents and children only.

1. The rules identifying Property Rich Companies and investors affected by the rules have been relaxed so that ownership by the investor must only be reviewed over the two years prior to disposal rather than the proposed five years.
2. A trading exemption will be available to prevent a charge arising where the property being disposed of is used in the course of a trade, other than to all but an “insignificant degree”.  It is thought insignificant will be less than 5% but this has still to be confirmed.

There will be a further technical consultation before the legislation is finalised with the changes coming into force in April 2019.

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