Non-UK residents will pay capital gains tax on disposals of UK residential property from 6 April 2015.
EXPERT LEGAL INSIGHTS / Private Client
Where an individual sells a property which has been their main or only residence for part, but not all, of their period of ownership they do not pay UK capital gains tax on gains which accrue in the last 36 months of their period of ownership. This period is being halved to 18 months from April 2014.
Does the Government intend to impose UK capital gains tax on non-UK resident owners of UK real estate? The press seem to think so – but:
- is it likely?; and
- perhaps more importantly, would existing gains be taxed?
The introduction of the new tax regime for high value residential property in the UK earlier this year has not dampened the enthusiasm of Asian investors wishing to acquire prime London residential real estate. Clients from the South-East Asia region continue to be attracted to the UK property market due to London’s safe haven status, the relative weakness of sterling and the strong long term performance of the market. This is further fuelled by Asian countries such as Singapore introducing measures to cool the domestic market which is driving investors away from local market.
The drive towards global transparency and automatic exchange of information has recently gained new impetus and Singapore has not been left behind.
- signaled that it will enter into a Model 1 FATCA Agreement with the US; and
- significantly increased the number of countries it will exchange information with on an ‘upon request’ basis.
Hong Kong’s trust law has been substantially updated in the hope of encouraging wealthy international families to establish trusts in the jurisdiction.
Key changes include the ability to establish a trust which can continue indefinitely, to reserve powers to the settlor without risking the validity of the trust and to protect the trust assets from the forced heirship rules of other jurisdictions.
You should read this if you, or your clients, own UK residential property through a company.
The UK Revenue (HMRC) has now released the draft ATED return. This confirms that details of the shareholders of a company, which is within the charge to the ATED, do not need to be included in the ATED return. The first ATED returns must be filed before 1 October 2013.
HMRC considers that using debt to buy assets that are not chargeable to inheritance tax allows scope for “two bites of the cherry”.
Finance Bill 2013 introduces provisions to counter this planning. The provisions restrict the set-off of borrowings if the borrowed money is used to buy assets which qualify for IHT relief. In particular, it has a significant impact on:
• non-UK domiciled individuals (and their trusts) who take out borrowings secured on UK assets to reduce their value for inheritance tax; and
• entrepreneurs using their houses as security for borrowings used in their businesses.
HMRC has proposed changes to the way in which inheritance tax charges on trusts are calculated. If enacted, the proposals will effectively mean an end to ‘pilot trusts’ (see below) and anyone who has established pilot trusts should review their planning. The proposed changes will impact on trustees, settlors and beneficiaries of trusts which are subject to UK inheritance tax, including trusts set up by non-UK domiciled settlors which hold UK assets.
Where a husband wholly owns and controls a company an order for the transfer of the company’s assets to the wife on divorce may be made where, on the particular facts of the case, the company holds those assets on trust for the husband.