Real Estate: Non-resident capital gains

The UK Government has announced major changes to the taxation of land and buildings held by non-UK residents, effective from 1 April 2019.

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Cherry Reynard
Published: 07 Aug 2018 Updated: 13 Jun 2022

The UK Government has announced major changes to the taxation of land and buildings held by non-UK residents, effective from 1 April 2019.

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For non-resident investors, these new rules fundamentally change the economics of investing in UK property. Conventional planning involving overseas ownership will lose its tax advantages and existing structures may be exposed to an increased tax burden.

Those invested in, considering investing in or advising on UK property should consider their positions.

The rules

Currently, non-residents are only subject to UK capital gains tax on disposals of residential property in the UK. From April 2019, the Government intends to widen the scope of UK tax for non-residents to include gains on all UK property, and certain interests in ‘property rich’ businesses.

Only gains accruing from 1 April 2019 will be taxable, with a rebasing exercise to be undertaken to value assets at that date.

The indirect interests caught by the new rules are interests of more than 25% in entities (including companies, partnerships and unit trusts) which have 75% or more of their gross asset value consisting of UK immovable property.

The impact

The proposed measures are intended to align the tax treatment of non-UK resident investors with that of UK residents who are already subject to tax on all their gains, and to reduce tax avoidance through holding UK commercial property in offshore structures.

What are we doing with our clients?

We are looking at the impact for clients in various scenarios, helping them to understand how the proposed rules will affect their existing and future UK property investments.

In some cases reorganisations are necessary; in others, we are looking to maximise available UK reliefs to reduce UK tax charges on gains.

By discussing their options with us now, our clients are taking practical steps prior to April 2019 and gaining assistance with what will be required when the new rules are in effect.

By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.


This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.