NRCGT Changes and Planning Points for Clients

04 / 06 / 2019

The new tax year (6 April 2019) brought further changes to the taxation of UK property owners by extending the Capital Gains Tax (“CGT”) rules to non-UK resident owners making direct disposals of non-residential (i.e. commercial) property and land, and the indirect disposal of UK property more generally. These changes therefore widen the scope of the so-called Non-Resident CGT (“NRCGT”) rules beyond the disposal of UK residential property which were introduced on 6 April 2015.

In brief this now means:

  • Direct disposals of all types of UK property by non-residents (i.e. individuals, trustees and companies) will be liable to a CGT on any gain calculated as arising (whereas previously only residential property disposed of non-residents was in the scope of a CGT charge).
  • Non-residents disposing of shareholdings or interests in companies or entities representing at least 25% stake in those companies, and where at least 75% of the gross asset value of a company derives directly or indirectly from UK property (a “property rich entity”) will also be within the scope of CGT, so call “indirect disposals”. Until now such indirect disposals were outside the scope of the NRCGT rules.

How gains are calculated and the nature and rate of tax payable will depend on the type of property and the tax payer making the disposal. A tax
return is required to be completed by the nonresident disposing of the property within 30 days of the disposal taking place, regardless of whether
the disposal actually gives rise to a gain and a full calculation of the gain (or loss) calculated as arising is required in all situations. Obtaining professional valuations of properties is important to ensure that any gains are calculated by reference to accurate valuations.

The CGT rules are often one of the number of tax and non-tax considerations property owners, whether UK resident or non-resident, need to consider when purchasing or disposal of property or restructuring property ownership. You can remain up to date with all things property and tax by subscribing to our dedicated property tax blog ‘Globally Speaking’ which you can subscribe to by emailing mbraithwaite@wedlakebell.com.