Finance Bill 2013
As part of a group of measures introduced to tackle tax avoidance through “enveloping residential properties”, the Government intends to extend the UK Capital Gains Tax (CGT) regime. Gains made on disposals of UK residential property (including shares or interests in such property) by non UK resident non-natural persons will be subject to CGT. HMRC intend to consult on the detail of the measure, in conjunction with the proposed Stamp Duty Land Tax (SDLT) annual charge for residential properties worth more than £2 million. It is, therefore, expected to come into force from April 2013.
For the purposes of this charge “non-natural persons” will include companies, collective investment schemes (including unit trusts), and partnerships in which a non-natural person is a partner. Individuals and most trusts appear not be caught, and there will be exclusions from the charge for property developers and corporate trustees in certain circumstances. Whether this exemption will extend to employee benefit trusts (EBTs) is not yet certain, and is likely to be considered during the consultation, though typically they would have a corporate trustee.
One of the features of the existing UK capital gains regime is that tax is generally chargeable only on gains made by UK resident individuals or companies. The Government’s intention to tax certain non-residents on capital gains made on UK residential property is therefore a significant change. However, it would bring UK tax legislation more into line with the tax treatment of immovable property in many other countries and in the UK tax treaties.