Budget 2015 affecting overseas investors in UK residential property

Overseas investors in UK property (e.g. Hong Kong, Chinese or Singapore based investors) using non-UK companies to invest in UK residential property will be affected by the 2015 Budget changes introducing a capital gains tax for disposals after 6 April 2015.   This Non-Resident CGT charge is different from the ATED-related CGT charge where high value residential property is sold by a Non-Natural person (e.g. a company) wherever based.  The NR-CGT charge may apply to gains after the ATED-related CGT charge which takes precedence.

Companies that are controlled by 5 or fewer persons are within the extended charge to CGT (excluding interests held by institutional investors or diversely held companies). Therefore foreign family groups need to structure the investment vehicle carefully.

The CGT rate and allowances will be similar to Corporation Tax. Groups of companies will also have special rules to allow them to offset gains and losses by group members, and file returns on a consolidated basis. Where UK residential property is sold by a diversely held company, a widely marketed fund or by a life assurance company as part of its assets that provide benefits to policyholders, these entities will be able to claim exemption from the capital gains tax charge.

The government does not currently intend to broaden the scope of the charge and apply CGT to disposals of interests in non-residential property.  Care homes and nursing homes will not be within scope of the charge.  There are however complex rules regarding the CGT treatment of other types of “communal” property that overseas investors need to be aware of.  Please follow the links below.