A number of changes to the way non-residents that hold UK land and property are taxed are included in the draft legislation for Finance Bill 2018-19, published on 6 July 2018. Some of these are intended to come into force as early as April 2019, meaning that clients and their advisers have less than eight months to get to grips with them.

This article provides a brief overview of these changes and highlights some key points to consider. Readers who think a provision may be relevant to their clients should consult the relevant draft legislation and explanatory notes for the Finance Bill.

Extension of scope of Non-Resident Capital Gains tax

Since April 2015, all non-UK resident individuals, closely held companies, trustees, personal representatives and funds have been subject to non-resident capital gains tax (NRCGT) when disposing of UK residential property (see s14B to 14H and Schedule 4ZZB TCGA 1992).

With effect from April 2019, the scope of NRCGT will be expanded to also cover disposals of:

  • Non-residential (i.e. commercial) UK property; and
  • “Substantial” interests in “UK property rich entities” – referred to as “indirect disposals” (see below).

Non-resident diversely held companies, widely held funds and life assurance companies will also be brought into the scope of NRCGT for the first time from April 2019. All non-UK resident companies, including close companies, will be charged to corporation tax rather than capital gains tax on their gains.

Where an asset is brought into NRCGT for the first time as a result of these changes, it can be rebased to its April 2019 market value, ensuring no gain arising prior to that date is subject to UK tax. Assets already in the scope of NRCGT (e.g. UK residential property) will continue to be rebased to April 2015.

A side effect of these changes, and one which may please many tax advisers, is that Annual Tax on Enveloped Dwellings (ATED)-related CGT will be abolished from April 2019.

Indirect disposals and NRCGT

The provisions for indirect disposals are complex and are intended to catch, for example, the situation where a non-resident sells shares in a company which holds UK land as an investment.

For an indirect disposal to be subject to NRCGT, the following conditions have to be met:

  • The disposal has to be of a right or interest in a “property rich” company – broadly one which, at the time of disposal, derives at least 75% of the total gross market value of its assets from interests in UK land; and
  • The non-resident investor must have a “substantial indirect interest” in the UK land – broadly at any time in the two years prior to disposal they (together with certain connected parties) had at least a 25% investment either directly, or indirectly, in the “property rich” company.

There is a helpful exemption – if all of the UK property (or all but an insignificant value) has been used for trading purposes throughout the year leading up to the disposal, and it is reasonable to conclude it will continue to be so used after the disposal, then the NRCGT rules won’t apply. This should mean for example that most investments by non-resident investors in UK retail and hospitality businesses are exempt.

Payments on account for residential property gains

Another proposed change will affect both UK residents and non-residents who own residential property.

From April 2020, UK residents will be required to make CGT payments on account and file returns within 30 days of disposing of a residential property in a similar way as for NRCGT. The change will not apply where the gain is not subject to CGT (e.g. because it is covered by private residence relief).

For non-UK residents, the existing NRCGT 30-day filing and payment on account requirement will be extended:

  • To apply to all companies from 6 April 2019; and
  • To remove the exception for making a payment on account where a self-assessment return is filed for disposals on or after 6 April 2020.

Non-UK resident companies carrying on a UK property business

From April 2020, non-UK resident companies carrying on a UK property business will become subject to corporation tax rather than income tax.

This raises several practical issues:

  • The corporation tax rules, including the corporate interest restriction and other anti-avoidance provisions will apply.
  • Existing income tax losses can be set off against future property business profits chargeable to corporation tax, but will not be available for group relief or use against other profits and will have to be tracked separately.
  • Non-resident companies will have to comply with the different filing and payment regime of corporation tax – including the requirement to submit returns and computations online in iXBRL format.


As can be seen, the proposed changes are quite wide ranging and could have a major impact on non-residents with UK property interests.

If you have non-UK resident clients, it is probably worth speaking to them about the changes as soon as possible. Things to consider include:

  • You may want to make clients who will be brought within NRCGT for the first time aware that any disposal after April 2019 may give rise to filing obligations and tax so they can plan accordingly. (This may include obtaining an April 2019 valuation for rebasing purposes.)
  • Would you be able to spot if a non-resident client made an indirect disposal subject to NRCGT?
  • Do you have a system in place to ensure clients inform you of relevant disposals as soon as possible so that they can meet the 30-day payment and filing deadlines?
  • For non-resident corporate clients with a UK property business, you may want to flag up the change to corporation tax in 2020, and what this will mean in terms of administrative burdens and costs.

Emma Rawson is technical officer at the ATT.

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