News added on 25.01.2019

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CGT

HMRC guidance on gains made by non-residents from April 2019 open for comment

HMRC has drafted guidance on non-resident capital gains for direct and indirect disposals of UK land from April 2019. What do you need to know?

Extended scope. The non-resident capital gains tax (CGT) rules will apply to all non-residents that hold investments in UK land. Companies making disposals of UK land will pay corporation tax on their chargeable gains, with individuals paying CGT.

Tax rates. Direct disposals of UK residential property continue to be taxable at the higher CGT rates of 18/28%. Indirect disposals of any UK land will be taxable at the lower rates of 10/20%. An indirect disposal would be a disposal of shares in a company that meets the "property richness test", whereby UK land accounts for at least 75% of the value of the company’s assets. Direct disposals of UK commercial property will also be taxable at the lower rates of 10/20%.

Tax computations. The default position is to rebase the value to the market value at April 2019, provided the asset was acquired before then. An election can be made for rebasing not to apply. However, if making the election results in a loss on an indirect disposal of UK land, the loss is not allowable. Note that annual tax on enveloped dwellings-related CGT will not apply from April 2019.

The draft guidance can be found here http://www.hmrc.gov.uk/gds/cg/attachments/CG-APP14__Non-resident_capital_gains_from_6_April_2019_draft_guidance.pdf. Relevant parties have until the end of February to provide feedback.

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