The new regime for taxation of non-resident property gains

The draft Finance Bill extends the charge to tax to the disposal of UK commercial property by non-UK residents. The draft legislation includes some significant changes from the consultation proposals, most notably concerning the rules for indirect disposals. When considering whether a company is property rich, an exception will apply where interests in UK land are used for the purposes of a trade, though further clarification is needed. The substantial indirect interest test to determine whether the new rules apply to a particular non-UK resident investor has been reduced to a two year period, and a narrower view is taken of when an investor’s interests are to be aggregated with those of connected persons. The proposed rules need to be considered in the context of any applicable double tax agreement between the UK and the country of residence of the non-resident person making indirect disposal of UK property. Despite the draft legislation taking effect from April 2019, a considerable number of complex principles and issues remain to be resolved, particularly in relation to collective investment schemes.