Following the publication of the Finance Act 2019, which announced the removal of the CTG exemption on commercial property held by non-UK residents with effect from 6 April 2019, any direct or indirect disposals made after this date will now be subject to CGT.
CGT will now also be imposed on the sale of company shares, where a substantial amount of company assets consist of UK real estate. This includes both residential and non-residential property.
What is CGT?
CGT is a tax on the profit when an asset is sold that has increased in value. Essentially, it is the gain made that is taxed, not the total amount received when an asset is sold.
Who will it impact?
These changes will impact overseas companies, private individuals, overseas trusts and Jersey Property Unit Trusts (JPUTs).
What tax rates will be charged?
Foreign companies will be charged at the corporation tax rate, which is currently 19%, reducing to 17% by April 2020.
Private individuals will be taxed at the normal CGT rate of 20% for commercial property and 28% for residential property.
(Source: Gov.uk website)
What are the exceptions?
Exceptions will include REITs, pension funds and Sovereign Wealth Funds.
Sales of ‘shares’ in property investment vehicles whereby 75% of tis asset value comprises UK real estate would be subject to tax.
How can we help?
Non-UK investors of commercial property will require a valuation of their assets as at the base valuation date of 6 April 2019, once a property is sold.
We would recommend tax advice is sought by a professional advisor however our Valuation team can assist with providing formal valuation reports compliant with RICS Valuation Standards, which can then be used to assist future negotiations on tax liabilities with HMRC.
James Taylor, Director of Valuation at LSH commented:
“We’re currently instructed by a number of overseas clients to provide valuations as a result of this change in legislation, not necessarily because clients are planning to dispose of assets, but because they wish to protect and mitigate their future tax liabilities from April 2019.
“It’s easier to do this now while information is readily accessible, rather than leaving this for an unknown date in years to come.”
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