On 28 March HM Treasury and HMRC published a consultation document setting out their proposals for charging non-UK residents capital gains tax (CGT) on disposals of UK residential property from 6 April 2015. Following the announcements in the Autumn Statement there was an expectation that the new CGT charge would only apply to properties worth more than £2m that were held by individuals and trustees. The consultation document proposals are much wider than expected.
EXPERT LEGAL INSIGHTS / Private Client
A relatively quiet Budget on the tax front. The main announcements relevant to private clients were:
- a significant (and this time positive) overhaul of pensions to give pensioners more choice about how they use their savings on retirement;
- merging of stocks and shares, and cash ISAs into a single system with a £15k annual limit;
- abolition of the 10% starting rate of income tax on savings income;
- extension of the 15% SDLT rate on residential property, the Annual Tax on Enveloped Dwellings (ATED) and the related capital gains tax (CGT) charge on homes subject to the ATED;
- confirmation that users of tax planning disclosed under the Disclosure of Tax Avoidance Schemes (DOTAS) regime or counteracted by the General Anti-Abuse Rule (GAAR) will have to pay any disputed tax upfront before taking their dispute with HMRC to court.
In the Budget today, the Chancellor extended the application of the annual tax on residential properties held by corporate vehicles, and the related Capital Gains Tax (CGT) charge, so that they will apply from April 2015 to properties worth over £1m and from April 2016 to properties worth over £500,000. In addition, the punitive 15% Stamp Duty Land Tax (SDLT) rate for purchases by corporate vehicles will apply to acquisitions of properties worth more than £500,000 from 20 March 2014.
For the ATED period 1 April 2014 to 31 March 2015 the ATED return and payment are due by 30 April. An ATED return must be filed, by this date, for any UK residential property valued at over £2m on 1 April 2012 (or acquired for more than £2m since then) which is beneficially owned by a company, a partnership (with a corporate member) or a collective investment scheme, even where a relief from the ATED applies.
Changes have been recommended to the Tier 1 (Investor) visa, including:
- increasing the minimum £1 million investment threshold to £2 million;
- removing the ability to borrow the funds that the applicant is required to invest in the UK; and
- introducing a premium route which would offer a successful applicant indefinite leave to remain in the UK after 2 years.
Controversial plans will give HMRC power to remove a taxpayer’s right of appeal in some cases and force them to concede. This risks making some FTT decisions binding and codifying poor decisions.
Read this if you, or any of your clients, have a dual employment contract.
The UK Revenue has published draft legislation which will prevent the future use of dual employment contracts in most cases. From 6 April 2014, earnings from the overseas contract under dual contract arrangements, which would previously have been taxable on the remittance basis, will in most cases be taxable on the arising basis.
Autumn Statement 2013: Non-UK residents subject to capital gains tax on residential property from April 2015
Non-UK residents will pay capital gains tax on disposals of UK residential property from 6 April 2015.
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?