A tax change taking effect from next month means that non-UK residents must pay tax on all UK land disposals - both residential and commercial. This has led the Association of Taxation Technicians (ATT) to alert non-UK residents who sell any UK land or property, that they must file a non-resident Capital Gains Tax return and pay any tax due within 30 days of the sale.
Non-UK residents selling a residential property have been liable to UK tax and required to file a tax return with HMRC within 30 days of sale since 6 April 2015. But from 6 April 2019, these rules will extend to cover all sales of UK land and property (both residential and commercial) as well as disposals of substantial interests in companies which are ‘UK property-rich’ (referred to as ‘indirect disposals’).1
Jon Stride, Co-Chair of the ATT’s Technical Steering Group, said:
“Any non-UK resident who owns an interest in UK land or property needs to be aware of these significant changes. In particular, those looking to sell need to be aware that they will have to file a non-resident Capital Gains Tax return with HMRC and pay any tax due, in a very short time frame.
“For disposals of commercial property and indirect disposals, only an increase in value after 6 April 2019 will be subject to tax.2 This means that, in the short term at least, any tax due on such disposals is likely to be minimal. But even if there is no tax due, or a property is sold at a loss, there is still a requirement to file a non-resident Capital Gains Tax return within 30 days or face penalties.3
“Non-residents who hold UK commercial land or property should consider getting their property valued as at 6 April 2019 whether or not they anticipate a future sale. In the event of such a sale, the value at that date would be used to calculate the taxable gain.”
Notes for editors
1. A non-UK resident individual making a direct disposal of residential property has been liable to UK tax on disposals since 6 April 2015. Finance Act 2019 extends these rules from 6 April 2019 so that UK tax is now due on all UK land disposals, both residential and commercial.
These new rules also apply to ‘indirect disposals’, which are broadly a disposal of a company based anywhere in the world which derives 75 per cent of its value from UK land where the non-resident individual has at least a 25 per cent interest.
As well as individuals, the new rules extend the circumstances in which non-resident companies can be subject to UK tax. From April 2019, any non-UK resident company making a direct or indirect disposal of UK land will be subject to UK corporation tax on any gain arising.
2. For UK residential properties disposed of by non-residents, gains from 6 April 2015 are taxable. For direct disposals of non-residential property (and all indirect disposals), only gains from 6 April 2019 are taxable. Property (or, for indirect disposals, shares) acquired before that date should be ‘rebased’ to the market value as at 6 April 2019 when calculating any gain on disposal.
3. The return and payment on account must be made even if the individual already submits self-assessment tax returns to HMRC.