Non-residents feel the pinch

The scope of the UK capital gains tax (CGT) regime now includes gains by non-residents on the disposal of non-residential UK property. The change came in on 6 April.

Indirect disposals are now caught as well. If that were not bad enough, the government is consulting on the introduction of a 1% stamp duty land tax (SDLT) surcharge for residential property purchases by non-residents in England and Northern Ireland.

Capital gains tax extension

Non-residents were already taxed on UK residential property gains. The changes mean that disposals of interests in any type of UK property are now caught by CGT. The indirect disposal rules apply on the disposal of a company or other entity where at least 75% of its asset value is derived from UK property. There is an exemption for investors who hold less than a 25% interest.

The value of a property can be rebased to its April 2019 value, so that only subsequent gains are taxed, and this option is available for both direct and indirect disposals. Of course, the original cost of the property can always be used if it would mean a smaller taxable gain.

SDLT surcharge

The 1% SDLT surcharge applies to non-UK residents who buy residential property in England or Northern Ireland. Non-UK resident companies will also be caught, and in this case the 1% surcharge is likely to be applied on top of the 15% anti-avoidance rate for residential properties worth over £500,000.