UK Budget 2017 Update


The recent UK Budget announcement included plans to ensure that non-resident investors in UK commercial property will, from April 2019, pay UK capital gains tax or corporation tax on gains. Although this is labelled as a consultation, it is very clearly stated that the strategic decision to extend the scope of UK property taxation has been made and the consultation is simply about the details of its implementation.

The measures announced also extend the scope of the existing Non-Resident Capital Gains Tax (NR CGT) regime for UK residential property.

Disposals of “envelopes”

Another new measure that will apply from April 2019 to both commercial and residential property will ensure that gains on disposals of interests in entities that are “property rich” will be chargeable to UK tax.


As with NR CGT for residential property, there will be rebasing to the start of the regime. Interestingly, rebasing for the new charges will either be on the April 2019 value or the original acquisition cost of the property. Unlike the existing NR CGT regime for residential property, there will not be an option to time apportion the gain in a straight line over the full ownership period pre and post April 2019.

Compliance issues

As is now the custom, there is an anti-forestalling rule. This applies to counteract the effect of any arrangements entered into from 22 November 2017 onwards to obtain an advantage in relation to the new provisions where those arrangements involve double taxation agreements. In plain English, this means that using treaty protection that restricts taxing rights over, for example, the disposal of shares in a non-UK company, to the home jurisdiction of that company won’t be allowed.

HMRC has recognised there will be challenges to ensure that non-UK residents comply with the new regime. The reporting regime for non-corporate investors will mirror the existing requirement under the NR CGT regime for residential property to file a return within 30 days of completing the transaction. Companies will have to register for UK corporation tax at the time of the disposal but the normal corporation tax time limits for filing and payment will apply. However, an additional reporting requirement is proposed for indirect disposals by non-UK residents. Broadly, an acting UK adviser (the type of adviser is not specified) who is aware of the transaction and cannot be certain that the transaction has been reported to HMRC will have the obligation to report the transaction to HMRC within 60 days.

Finally, the consultation document makes no mention of interests in UK commercial property becoming “relevant property” for UK inheritance tax purposes, as was the case with UK residential property interests with effect from 6 April 2017. If that remains the case, non-UK domiciled investors may still wish to hold UK commercial property through offshore entities for IHT purposes.

Non-resident investors are now faced with some difficult choices to make between now and April 2019 and we, and more pertinently, the UK property industry, await developments with interest.

If you would like to discuss anything mentioned above and any other planning options in more detail please contact Andy Lee today.


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