As a result of the new ‘single final event’ introduced by Mr Hammond, the draft Finance Bill clauses were published last month, and have made for interesting reading. Buried within are a number of tax changes that take effect from April 2019 which are likely to have a wide range of implications for property investors and developers.
The legislation is currently out for consultation and possibly subject to amendment, but it’s worth making sure you’re prepared for the upcoming changes. Below is a summary of the 5 tax issues to be aware of:
For property developers and other property trading groups, there’s a handy extension to Entrepreneurs’ Relief included in the legislation. This legislation means the 10% rate of Capital Gains Tax should be available in more situations – and is particularly useful for companies likely to go through additional rounds of equity financing, which effectively dilute the percentage ownership of the existing shareholders. If your trading company is likely to go through a round of equity funding, it’s worth checking if these new rules can be of benefit to you, as the extension is not automatic, and certain elections will have to be made.
Non-resident investors in UK property
For international investors in UK property, from April next year the tax landscape significantly changes. Firstly, non-residents selling UK commercial property will find themselves within the scope of UK Capital Gains Tax for possibly the first time. This change is broader than straight property transactions, and includes transactions in property companies, or other property rich entities. Secondly, all non-resident corporate landlords who have previously filed annual income tax returns with HMRC will need to move onto a corporation tax basis from April 2020. These constitute major changes in the taxation of non-residents, and we suggest international investors consider their structure and put processes in place to prepare for these reporting requirements.
Capital Gains Tax on residential property – 30 day limit
For anyone with a second home, the time limit in which tax is payable on the gain is changing from 2020. From April 2020, tax on the gain will be due within 30 days of completion rather than payable under self-assessment (which it currently is). This will not impact cases where PPR is available. This is likely to have a significant cash flow impact on individuals making gains on second homes.
This piece of anti-avoidance legislation looks to apply Transfer Pricing to individuals and SMEs in certain situations. In particular, it can have an effect even when transacting with a non-related party.