This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. Find out more here.  
 

UK Reduces Scope Of New Property Gains Tax

Friday, August 8, 2014

The British Property Federation (BPF) and the Chartered Institute of Taxation (CIOT) have welcomed an announcement from HM Revenue and Customs (HMRC) that institutional investors and companies with diverse ownership will be excluded from plans for a new capital gains tax (CGT) on UK properties sold by non-residents. The charge will come into effect in April 2015 and apply only to gains arising from that date.

Unlike other countries that collect tax on gains relating to disposals of residential property located within their jurisdiction, the UK does not generally charge CGT on disposals by non-residents. This means that any gain made by a non-resident individual on UK residential property is either taxed in the individual's home country or not taxed at all. In contrast, UK resident individuals are subject to CGT on disposals of any residential property that is not their primary residence, including on the gains made on any residential property they own abroad. The taxation of gains made on residential property that is owned in other ways by UK persons – through trusts, companies, and funds – is either subject to UK CGT, or UK corporation tax (CT), depending on the nature of the investment and the structure involved.

Welcoming the decision to exclude institutional investors and companies with diverse ownership, the BPF noted that it had warned that the proposed concessions did not adequately reflect the diversity of investment structures used by widely-owned institutional investors. It said that this could threaten investment into the UK's real estate market, in particular into the private rented sector and build to rent. The BPF highlighted that widely held institutional investors need to be encouraged to put their money in the UK and that a blanket extension of capital gains tax could be an unwelcome deterrent.

The Government now intends to set the scope for the new tax by reference to a form of 'close company' test, drawing on existing legislation, as suggested by the BPF in its consultation response.

Ion Fletcher, Director of Policy (Finance), British Property Federation, said: "We are thrilled that the Government has recognised that large-scale institutional investment is crucial to increasing the UK's housing supply, and that imposing capital gains tax on overseas funds could be detrimental to the economy. We are currently facing a housing crisis and it is important that government maintains a stable tax environment to attract overseas capital, which will help deliver economic growth. However, much work remains to be done on the all-important details of the new tax and we will continue to engage with government to ensure that overseas investment is safeguarded."

"Our consultation response outlined particular concerns about the impact of government proposals for investment in the nascent build-to-rent sector, which has so far relied on overseas institutional investors for a number of significant projects, so this announcement is reassuring in that respect," he concluded.

Meanwhile, Patrick Stevens, CIOT Tax Policy Director, commented: "The Government are understandably eager to ensure that the tax treatment of non-residents that own and make gains on UK residential property is comparable to that of UK residents. We also recognise the Government's desire to encourage institutional investment, domestic and overseas, in the UK's housing market and so it makes sense to exempt these groups from the charge."

"However, problems remain with the legislation specifically regarding Principal Private Residence (PPR) and the Annual Tax on Enveloped Dwellings (ATED). In their plans to extend CGT to non-residents in certain circumstances, HMRC's proposal to withdraw the PPR election for all taxpayers continues to alarm the Institute. If the plans were to go ahead, then UK residents could be faced with CGT charges on their first or second properties, with no certainty as to which is which."

CIOT has also called on the Government to abolish Annual Tax on Enveloped Dwellings (ATED)-related CGT for disposals from April 2015. Such gains would be within the scope of the proposed new charge CGT charge on non-residents, and there is no need for the complication of an additional system of charge, it said.

Mailing List

Click here to manage your mailing list preferences, or view our privacy statement.


The Report

Offshore Trusts Guide: Introduction

The History of Offshore Trusts
Development of Professional Competence in the Jurisdictions
What Future for the Trust?
The New Age of Transparency
The Swiss Association of Trust Companies
The Society of Trusts and Estates Practitioners

Offshore Trusts Guide: Jurisdictions

Bahamas

Bahamas: Legal Framework and Formation Rules and Fees
Bahamas: 2006 Private Trust Companies Legislation

Barbados

Barbados: Legal Framework and Formation Rules and Fees
Barbados: Supervisory and Licensing Regime and Fees

Bermuda

Bermuda: Legal Framework and Formation Rules and Fees
Bermuda: Supervisory and Licensing Regime and Fees

British Virgin Islands

British Virgin Islands: Legal Framework and Formation Rules and Fees
British Virgin Islands: Special Trusts Act 2003
British Virgin Islands: The Trustee Act 2003
British Virgin Islands: :Supervisory and Licensing Regime and Fees
British Virgin Islands: New Laws on Private Trust Companies
British Virgin Islands: New Private Trust Company Regulations

Cayman Islands

Cayman Islands: Legal Framework and Formation Rules and Fees
Cayman Islands: Supervisory and Licensing Regime and Fees

Cook Islands

Cook Islands: Legal Framework and Formation Rules and Fees
Cook Islands: Supervisory and Licensing Regime and Fees

Cyprus

Cyprus: Legal Framework and Formation Rules and Fees
Cyprus: Supervision, Licensing and Tax

Gibraltar

Gibraltar: Legal Framework and Formation Rules and Fees
Gibraltar: Legislation, Regulation and Supervision

Guernsey

Guernsey: Legal Framework and Formation Rules and Fees
Guernsey: Trusts Law 2007

Isle of Man

Isle of Man: Legal Framework and Formation Rules and Fees
Isle of Man: Supervisory and Licensing Regime
Isle of Man: Uses Clients and Tax Treatment

Jersey

Jersey: Legal Framework and Formation Rules and Fees
Jersey: Supervisory and Licensing Regime
Jersey: Trusts Amendment Act 2006
Jersey: Foundations

Liechtenstein

Liechtenstein: Legal Framework and Formation Rules and Fees
Liechtenstein: Regulation Supervision and Transparency
Liechtenstein: Characteristics of Liechtenstein Trusts
Liechtenstein: Foundations

Madeira

Madeira: Legal Framework and Formation Rules and Fees

Malta

Malta: Legal Framework and Formation Rules and Fees
Malta: The Trust and Trustees Act 2004

Mauritius

Mauritius: Legal Framework and Formation Rules and Fees
Mauritius: Characteristics of the 2001 Trusts Act
Mauritius: Additional Provisions of the 2001 Trusts Act
Mauritius: Tax Treatment

Monaco

Monaco: Legal Framework and Formation Rules and Fees

Nevis

Nevis: Legal Framework and Formation Rules and Fees

Panama

Panama: Legal Framework and Formation Rules and Fees
Panama: Requirements for Acting as Trust Company in Panama

Seychelles

Seychelles: Legal Framework and Formation Rules and Fees

Turks & Caicos

Turks & Caicos: Legal Framework and Formation Rules and Fees
Turks & Caicos: The Voidable Dispositions Ordinance

Vanuatu

Vanuatu Legal Framework and Formation Rules and Fees




Latest News

Jersey Proposes Infrastructure Levy
23/6/2017
Jersey is consulting on the introduction of a land development charge, to be called the Jersey Infrastructure Levy.

ADGM Establishes REIT Regime
20/6/2017
Abu Dhabi Global Market, the low-tax international financial center, has introduced a private real estate investment trusts regime.

Jersey Research Highlights China HNW Succession Issues
15/6/2017
Jersey's financial services promotion agency, Jersey Finance, has published new research on the key challenges facing wealth management practitioners working with China's wealthiest individuals.

NZ Foreign Trust Numbers Expected To Fall
27/6/2017
Fewer than 70 out of 11,645 New Zealand foreign trusts have reregistered following the introduction of tougher disclosure and eligibility requirements, with only three weeks left to go before the final deadline.

Abu Dhabi Tax-Free Zone To Launch Foundations
2/6/2017
Abu Dhabi Global Market, the low-tax international financial center, is seeking feedback on its proposal to allow the formation of "foundations," a trust-like entity widely used in civil law jurisdictions.

IoM Consults On Funds Sector Rules
22/5/2017
The Isle of Man Financial Services Authority, which supervises the island's financial services sector, is seeking feedback on draft guidance dealing with the governance of collective investment schemes.

Dubai Tax-Free Zone Seeing New Business From India
19/5/2017
The Dubai International Financial Centre, the leading financial hub in the United Arab Emirates, has become an increasingly popular destination for Indian banks, financial institutions, and fund managers, the zone has said.

Guernsey Issues Warning On 'Sark Company Registry'
18/5/2017
The Guernsey Financial Services Commission has issued a warning concerning an entity named "Sark Company Registry," while investigations are ongoing.

Abu Dhabi Free Zone Hopes To Attract Venture Capital Firms
15/5/2017
Abu Dhabi Global Market, the low-tax international financial center, has unveiled a regulatory framework for managers of venture capital funds.

Australian Budget Targets Housing, Tax Compliance
10/5/2017
Australian Treasurer Scott Morrison's 2017 Budget focused on measures to cool the housing market and crack down on tax avoidance.

Australia Delays Action On Stapled Structures
2/5/2017
The Australian Government has decided to extend a review into the taxation of stapled structures. It will not tackle the issue at the upcoming Budget.

BVI Financial Firms Need To Develop New Niches
13/4/2017
BVI Finance, the financial services industry promotional agency, has said the industry must actively adapt to target new opportunities and promote new offerings internationally.

ADGM Revises Pooled Fund Capital Req's
11/4/2017
Abu Dhabi Global Market, the low-tax international financial center, has revised the capital requirements applicable to managers of collective investment funds, with effect from April 10, 2017.

ADGM Consults On Allowing REITs
6/4/2017
Abu Dhabi Global Market, the low-tax international financial center, is consulting stakeholders on plans to allow the establishment of private real estate investment trusts.

Gibraltar To Offer Foundations
4/4/2017
Gibraltar's Parliament recently passed a bill permitting the establishment of Private Foundations.