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Tax
Widening the scope
The introduction of NRCGT from April 2015 (as outlined in my article in Nov/Dec/Jan 2015/16 issue) marked a fundamental UK Government policy change, since the introduction of UK CGT in 1965 and its general exemption for non-UK residents.
These proposals seek to expand this scope. Currently, NRCGT applies only to disposals of UK residential property by non- UK resident individuals, trusts, personal representatives and closely-held companies, and only then where there is a direct disposal. These proposals will bring widely-held companies within the charge to CT for dispos- als of UK residential property and will also bring indirect disposals of UK property (subject to certain criteria), within the scope of UK taxation – this being a further new development in UK taxation.
These changes will affect the investment in UK property that is undertaken through Collective Investment Vehicles (CIVs) and Real Estate Investment Trusts (REITs). Whilst they will continue to benefit from current tax exemption on direct disposals, the rules for indirect disposals are expected to
apply when the non-resident disposes of an l Gibraltar resident individual or trust owners
interest in the CIV/REIT. It is worth noting that there is currently
and looks set to continue, a specific exemption from UK taxation for gains made by certain overseas pension schemes.
Next steps
These proposals will clearly expand the tax base of both UK CT and CGT and their impact will affect many, for example: l Gibraltar resident companies renting out UK property, currently under the Non Resident Landlord regime filing UK income tax returns annually, will need to become familiar with the UK CT regime and its requirements. The good news is a lower tax rate should be charged on the rental profits, however any gains on any UK property will fall within the scope and the complexities of the UK CT regime need to be considered.
For Gibraltar resident companies already within the scope of Annual Tax on Enveloped Dwellings (ATED), it is proposed that this complex regime be harmonised, to the effect that ATED related gains, for companies, could become chargeable to CT.
of UK commercial property will fall within the scope and need to become familiar with the UK CGT regime and its requirements. l All non-UK resident owners disposing of UK property will broadly need to report the direct or indirect disposal to HMRC within the tight timeframe of 30 days.
Keeping up to date with this rapid pace of legislative change can pose considerable challenges for non-UK residents. They are often unaware of such developments and fitting into the UK’s Self-Assessment system can involve delays and difficulties. Add to this that so much of the UK’s property taxation regime has been built on a piecemeal basis and the difficulties stack up!
Quite apart from these changes, the penalties associated with recovering lost tax where an offshore position exists are to be dramatically increased from 1 October 2018.
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Gibraltar International 27