Taxation of UK Property Interests

Over the last 6 years we have seen the introduction of a number of different regimes designed to bring UK property further into the charge to UK taxes.

2013 saw the introduction of the Annual Tax on Enveloped Dwellings (“ATED”) legislation, which imposed an annual tax charge, and capital gains tax on the sales of UK residential property valued in excess of £2 million.

2015 saw the introduction of capital gains tax on all residential property transactions, as well as reducing the property values on which the ATED charge applied, further reduced in 2016 to its current de minimis value of £500,000.

2017 saw the start of restrictions on tax relief for interest paid on residential property loans.

Finally changes enacted in the 2019 Finance Act have now brought into charge gains arising from the sale of commercial property. These rules will now apply to direct property sales and, for the first time the sale of companies which derive 75% or more of their value from UK property interests (“property rich companies”).

Rebasing is available, which means that whilst still reportable, only gains accruing after 6 April 2019 will be subject to tax.

The manner in which these gains will need to be reported will also change, with disposals by non-resident companies falling within the scope of corporation tax from 6 April 2019.

Non-resident companies will fully transition into the corporation tax regime in relation to all profits from 6 April 2020.

The rules on property rich companies are complex, and the reporting deadlines are tight so please contact us if you are contemplating the sale of any UK property, the sale of shares in property rich companies or indeed the transfer of interests in such property or company between family or group members.

For further assistance on these matters please contact,

Darren Hersey (darren.hersey@sgllp.co.uk)

Debbie Dolega (debbie.dolega@sgllp.co.uk)

Gary Moment (gary.moment@sgllp.co.uk)

Peter Langridge (peter.langridge@sgllp.co.uk)