Real estate investor sentiment ‘unsettled’ by new UK Capital Gains Tax regime

• Nearly two thirds (61%) of real estate investors are concerned by the impact of changes to UK Capital Gains Tax (CGT)
• Leading concern is transaction costs for restructuring interests
• 32% say they will have to alter their structures

Nearly two thirds (61%) of real estate investors are concerned about the impact of the new regime on taxing gains made by non-resident investors on UK real estate according to a new report commissioned by Intertrust, the leading global provider of high-value trust, corporate and fund services. This includes 13% of property investors who are ‘extremely’ concerned, according to the survey.

Under the new changes, which are due to come into effect in April 2019, non-resident investors will pay Capital Gains Tax (CGT) on disposals of all types of UK real estate, extending rules that currently apply to residential property only. The rule changes are designed to create a single regime for disposals of commercial and residential real estate and a level playing field for UK and non-UK based investors.

These changes have sparked a wave of uncertainty among real estate investors, according to the survey. The leading concern associated with the changes, cited by 57% of investors, was the amount of transaction costs they will incur for restructuring their interests.

Intertrust’s survey also asked respondents about their likely response to the changes, with 32% saying that they will need to alter their structures. Given the complexity of this process, many investors said that they would be seeking external assistance, with 22% having either already consulted, or planning to consult, with advisors on how to manage the change.

“With the new CGT regime presenting a fundamental shift in the international property investment landscape, we’re seeing an increasing number of clients turn to us to discuss what exactly the changes mean for them and their investments,” said Jon Barratt, Head of Real Estate at Intertrust.

“With 40% of investors having maintained or increased their allocations to UK property over the last 12 months, the UK has continued to be one of the most popular destinations for overseas capital. Whether the UK retains its appeal over the next year remains to be seen. This change to CGT is just one more area of uncertainty in a market already exposed to the unknown outcomes of Brexit.”

To read the full report, click here.