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21 September 2018

UK property continues to be a target for tax and greater transparency

The piecemeal approach to changes in the taxation of UK property continues to dominate the sector.

Gains on property have been within the sights of the legislators for some years now as it became clear that the UK was out of sync with other jurisdictions where, unlike the more favourable position that used to apply in the UK, non-residents are taxed on property gains. UK residential property in corporate structures and partnerships subject to the annual tax on enveloped dwellings (ATED) was the first to become potentially liable with the introduction of ATED-related capital gains tax in 2013.

A much wider canvas was introduced in 2015 with capital gains tax (CGT) for non-resident individuals, companies and trusts disposing of UK residential property (NRCGT). Most recently, following the Autumn Budget 2017, NRCGT will be extended in April 2019 to disposals of commercial property by non-UK residents, and a consultation was announced.

The interaction of ATED-related CGT and NRCGT, and the compliance, has proved quite demanding. Responses to the consultation recommended that advantage be taken of this new change to abolish ATED-related CGT and to impose some coherence on the system. The draft legislation confirms that ATED-related CGT will indeed be abolished – a rare instance of a tax being introduced and abolished in the same decade!

Meanwhile on the transparency front, the pressure continues to create a publicly available register of beneficial owners of UK residential property based on the Persons with Significant Control register. First announced at the anti-corruption summit in May 2016, the Draft Registration of Overseas Entities Bill was issued just before the 2018 summer recess. The proposed format is for all overseas legal entities (eg companies and partnerships), but not trusts, which own UK property to have to register at Companies House and to obtain an overseas entity ID. Information will have to be updated annually. Unless this is done, where such an entity owns UK property it will not be able to enter into a transaction relating to that property. As expected, the new legislation will erode the privacy which such structures have historically provided.


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