Tax changes - UK property - non-UK residents - BDO 08/04/2020, 20(04

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Article: Tax changes for UK property held by non- PRINT OR SHARE

UK residents
24 December 2019
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Changes for 2019, 2020 – and beyond?
In recent years, several changes have been made to the taxation of UK real estate held by non-UK residents.
Further changes, including shorter filing and payment deadlines, take effect in 2019 and 2020, and there is a
further proposed change with (as yet) no effective date. Advisers should ensure that clients are aware of the
changes and update their systems as necessary.

Change from 1 March 2019

The deadline for filing a Stamp Duty Land Tax return in England and Northern Ireland was shortened from 30
days to 14 days for transactions with an effective date on or after 1 March 2019.

Changes from 6 April 2019

1. The existing charge to tax on gains realised by non-UK residents on UK residential property is extended
to ALL UK properties. Specifically the following are now brought into charge:-

Gains on commercial property; and

Gains on residential property owned by diversely held companies. (Previously, non-resident CGT did not
apply to residential properties owned by companies that were diversely held, i.e. that would not have
been close if UK resident).

1. Gains on disposals by non-residents of ‘assets deriving 75% of their value from UK property’ – typically
shares in companies owning UK property - are brought into charge. However:

The non-resident person must have a ‘substantial indirect interest’ in the property, being a 25% interest
at any time during the previous two years;
No gain arises where all, or nearly all, the underlying UK property is ‘used for trade purposes';

1. A separate regime will operate for ‘property rich’ collective investment vehicles. In brief, the default
position is that the collective investment vehicle is treated as if it were a company, but it can elect to be
considered transparent so that the underlying investors are deemed to have realised the gain.

2. For properties and assets first coming into charge on 6 April 2019 the gain will be, in most cases,
calculated with reference to the increase in value from 5 April 2019. An election can be made to use the
total gain (or loss) since acquisition. (Unlike the 2015 transitional rules, it will not be possible to use time
apportionment to calculate the post April 2019 gain, so a 5 April 2019 valuation will be required.)

3. The ATED-related capital gains tax which has applied to some residential properties owned by
companies since 2013 is abolished. (No gain will arise for ownership prior to rebasing in April 2015 even if
the dwelling was subject to an ATED charge prior to that date.)

4. UK property gains realised by non-UK resident companies are subject to corporation tax instead of CGT.
Brought forward capital losses (under NRCGT or ATED-related rules) remain available for corporation tax
purposes.

Non-resident companies are no longer be required to complete NRCGT returns, as they are not required
under Corporation Tax.
The normal Corporation Tax filing and quarterly payment rules apply. For example, if a non-resident
company disposes of its last UK property, its UK rental business will cease and the accounting period
will end. A Corporation Tax return will be required for that shortened accounting period. The shorter
accounting period will mean that the thresholds for quarterly payments are reduced and the Corporation
Tax payment date may be advanced.
Specifically for disposals in 2019/20, the disposal of a UK property will result in a one-day accounting
period. A single stand-alone company will be considered very large if the capital gain exceeds £54,794
and, strictly, the corporation tax will be payable on the date of the disposal. By concession, HMRC will
treat the tax as payable 3 months and 14 days after the end of the one-day accounting period.
If in 2019/20 there is more than one disposal in the accounting period, each disposal creates its own
one-day accounting period with reporting and payment obligations as above. However, by concession,
where there are four or more disposals HMRC has stated that it will accept a 12 month accounting
period.

https://www.bdo.co.uk/en-gb/insights/tax/tax-support-for-professionals/tax-changes-for-uk-property-held-by-non-uk-residents Page 1 of 2
Tax changes - UK property - non-UK residents - BDO 08/04/2020, 20(04

1. IN ALL CASES, individuals must make a payment on account of non-resident CGT within 30 days of
completion, i.e. when they file their NRCGT return - it will no longer be possible to choose to delay paying
CGT until filing a self-assessment return.

Changes from 6 April 2020

1. Non-UK resident companies that carry on a UK property rental business or have other UK property
income will be liable to corporation tax instead of income tax – a year after their UK property gains become
subject to corporation tax. Unused income tax losses are carried forward for corporation tax purposes.

The definition of ‘UK related company’ for group relief purposes is extended to include non-resident
companies within the scope to corporation tax so that such companies can benefit from group relief from 6
April 2020. (The change to group relief is backdated to 5 July 2016 so as to also cover non-resident
property dealing/development companies brought into corporation tax by the changes to the Transactions
in Land anti-avoidance provisions on that date)

2. The requirement to report and pay CGT within 30 days of completion is extended to disposal of UK
residential property by UK residents where a gain has accrued – i.e. no return is required where a gain is
wholly relieved by PPR.

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