Q. I am an overseas Landlord that is thinking of taking advantage of this sudden surge in value over the last 12 months by selling up. But some of my London colleagues have mentioned that overseas landlords could be subject to Capital Gains Tax?! Is this true and do you have any further information on the status of this government change in CGT?
A. HMRC has made a number of tax announcements recently which could have major implications for Non-resident owners of UK residential property. The Government consultation on the proposals to introduce a capital gains tax liability on non-resident owners of UK residential property closed in June and the minutes from the working groups that were held during the consultation period were published on 31st July. Whilst the final rules and regulations are still not available, we expect the results to be published sometime soon. The latest information does however provide some clarity with regard to the likely tax position for collective investment vehicles. So just for clarity, currently and as you are probably already aware, non-resident owners of UK residential property are not liable to capital gains tax in the UK.
So what are the HMRC’S proposed changes?
The Government has confirmed that, with effect from April 2015, non-resident owners of UK residential property will be liable to capital gains tax in the UK upon disposal of their properties. The Government has stated that pension funds and other diversely owned collective investment funds are not intended to be brought within the scope of the extension of CGT to non-residents. However, there appear to be definitional issues regarding the different types of collective investment schemes which are unresolved and the proposed solution is to introduce a “close company” test to limit the scope of the extension of CGT. One positive sign is that the Government wishes to encourage institutional investment in the residential sector, so it could be assumed although by no means guaranteed that the final regulations will be on the generous side rather than being overly restrictive. We hope that these final results will be published as soon as possible in order to give non-resident owners like you sufficient time to decide how they will react before the tax is introduced in April 2015.
Check out this weeks ‘Home Front’ column in The Wharf newspaper.