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Update: Non-resident Capital Gains Tax on UK commercial property

23 November 2018

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In Autumn 2017, Chancellor Philip Hammond announced that from 5 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. The new rules will have the effect of reducing the incentive currently in place for multinational groups to hold UK property through offshore structures, often in low tax or no tax jurisdictions.

On 6 July 2018 HM Revenue & Customs and HM Treasury published an official response1 to feedback received from industry participants to their joint consultation document of 22 November 2017. This initial consultation proposed the application of CGT to non-resident’s gains on UK commercial property.

On 7 November 2018, The UK Finance (No.3) Bill was published and confirms the relief offered to offshore collective investment vehicles (CIVs) such as funds, JPUTs and GPUTs. The Technical Note highlights the creation of two new elections, a transparency election and an exemption election. These elections will help to achieve a level playing field whereby investors are still able to choose to structure their UK property holdings through Jersey and Guernsey, as well as through other jurisdictions in Europe.

To read the full Technical Note, click here.

To read the Finance (No.3) Bill, click here.

At Intertrust, we’re regularly monitoring any developments regarding Capital Gains Tax and will continue to update accordingly.

To read our real estate research report, that touches on changes to Capital Gains Tax, click here.