As we have come to expect, yet more anti-avoidance rules for UK property were announced in Wednesday's budget. The focus shifted from residential to commercial property to some extent but both were covered. Investment in UK land is becoming ever more complicated – not to mention expensive in tax terms!
The key announcements in this area were as follows:
- Capital gains tax for non-UK residents which is currently in place for UK residential property only, will be extended to cover commercial property. The charge will cover gains from April 2019 in most cases.
- The current capital gains tax charge on non-UK resident companies which own UK residential property only applies to companies held by 5 or fewer 'owners' (closely held). It will now be extended to companies with multiple owners (widely held).
- A new capital gains charge on disposals on shares in property rich companies and groups of companies by non-UK residents will be introduced. It is proposed that the charge will apply to sales of shares in companies where their value is more than 75pc derived from UK property assets (ignoring any debt) and the seller has owned 25pc or more of the company in the last 5 years.
- In the interests of simplification there will a consultation on aligning the various (and numerous) different regimes taxing profits made on UK property into a simpler system. It is proposed that all companies (UK and non-UK) will pay UK Corporation tax and individuals and non-corporates – such as trusts – will pay capital gains tax or income tax. Unfortunately it is very likely that bringing company profits into the corporation tax regime will add complexity due to existing difficulties with the regime.
And on a more positive note, there will be relief from SDLT on the first £300,000 for first time buyers buying properties worth up to £500,000 with immediate effect.
There were a few other areas of interest for personal taxpayers: namely that the annual limit for EIS relief will be increased to £2m from 6 April 2018 for knowledge intensive companies ; and there will be a consultation on reducing the minimum holding of 5pc for entrepreneurs relief where this is due to the company taking on external investment.
It will also be of interest to many of our readers that there will be a consultation on simplifying the taxation of trusts released in 2018.
And finally, time limits for assessing non-deliberate offshore tax non-compliance will be extended from a maximum of 6 years to 12 years. This could place a significant additional burden on taxpayers whose non-compliance was unintentional.
If you require further information on anything covered in this briefing please contact Diana Davidson, Claire Randall or your usual contact at the firm on 020 3375 7000.
This publication is a general summary. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, November 2017