As per UK government guidelines, property that is in the process of being constructed or adapted for use as a dwelling will be in scope of the charge. Disposals of building land will be outside the scope of the extended CGT charge until such time as a residential building is under construction.
Where a building is demolished, the resultant land will be regarded as building land irrespective of what structure may subsequently be constructed. The period of carrying out works to demolish a dwelling or convert it to a non-residential use will be regarded as a period of non-residential use, provided that any necessary planning consent for the works has been given and the taxpayer completes the works prior to the effective completion of the disposal. Further, where, for reasons connected with a conversion or demolition, a dwelling is unoccupied immediately prior to the works being performed, that period will also be regarded as a non-residential period. Where the works are not completed, the building will be regarded as residential during the period that the works are performed (and for the period it is unoccupied immediately prior to then).
Where a change of use occurs over the period of ownership, the gain accruing on disposal will be time apportioned to reflect the time that the building was not used for a residential purpose.
The government has also decided that disposals of rights to acquire a UK residential property ‘off plan’ (before it has been constructed) will be treated in the same way as if it were a disposal of an interest in a completed property. This will affect many Asian investors as buying UK property “off-plan” is popular given the number of property shows held in HK, Singapore and China.