In recent years, property owners have seen quite a range of new taxes and tax rises, mainly aimed at residential property ownership. These have included stamp duty land tax rises, the introduction of the annual tax on enveloped dwellings (ATED) aimed at residential property held via companies, capital gains tax for non-UK resident owners and inheritance tax charges where property is held via an overseas company.
Next year sees another swathe of new taxes, and this time commercial property is also in the taxman’s sights. The changes from April 2019 include tax on capital gains on:
- commercial property owned by a non-UK resident;
- residential property held by diversely held companies and funds; and
- substantial shareholding in property-rich companies (75 per cent of gross assets is property-related).
Non-resident companies, trusts and individuals could find themselves in a new UK tax regime with the need to register with UK HMRC and be prepared for the payment of tax on disposals. Rebasing will be available for those caught in the new capital gains tax regime so that only gains from April 2019 will be caught on future disposals. However, given there will be a reporting requirement and need for valuations for disposals from April 2019, if disposals are being considered now then a sale prior to April should reduce the administration burden.
While a disposal of UK-sited property is perhaps more obviously taxed, the disposal of shares and funds caught by the new regime creates a potentially big trap for the unwary, particularly if the transaction takes place outside of the UK. A foreign resident, disposing of shares in a foreign company to a foreign buyer, where the only connection is that that the company owns UK property, will be subject to tax.
And finally, while a rebasing might be helpful, it will be based on values immediately after the UK exits the European Union. Only a high value will be helpful for rebasing!