Capital gains tax and corporation tax: a re-statement
Taxing gains made by non-residents on UK immovable property.
Legislation will be introduced in Finance Bill 2018/19 for disposal made on or after 6 April 2019 to accommodate the taxation of non-UK resident persons making disposals of interest in UK land, and simplify the alignment of the new and existing rules. The provisions are a re-statement of the existing law and make no change to the way the existing provisions work.
All non-UK resident persons, whether liable to capital gains tax or corporation tax, will be taxable on gains on disposals of interests in any type of UK land. The elections for the non-resident capital gains tax rules not to apply for certain persons have been removed.
All non-UK resident persons will also be taxable on indirect disposals of UK. The indirect disposal rules will apply where a person makes a disposal of an entity that derives 75% or more of its gross asset value from UK land. There will be an exemption for investors in such entities who hold a less than 25% interest. The gains on indirect disposals will be calculated using the value of the asset being disposed of, rather than the value of the underlying UK land.
There will be a trading exemption so that disposals of interests in property rich entities that are trading before and after the disposal will not be chargeable disposals where the land is used in the trade. This is likely to apply where, for example, a non-UK resident disposes of shares in a retailer which owns a significant value of shops.
All non-UK resident companies, including close companies, will be charged to corporation tax rather than capital gains tax on their gains.
Existing reliefs and exemptions available for capital gains will be available to non-UK resident, with modifications where necessary. Those who are exempt from capital gains for reasons other than being non-UK resident will continue to be exempt.
Losses arising to non-UK resident companies under the new rules will be available in the same way as capital losses for UK resident companies. Capital gains tax losses will follow the existing rules for non-resident capital gains tax losses.
There will be options to calculate the gain or loss on a disposal using the original acquisition cost of the asset or using the value of the asset at commencement of the rules in April 2019. Both options will be available for both direct and indirect disposals. Where the original cost basis is used to calculate an indirect disposal and this results in a loss it will not be an allowable loss.