residential properties owned by NNPs worth in excess of £500,000 on 1 April 2012 (or at acquisition if later). From ATED tax year 2018/19, the valuation date changed to 1 April 2017 for properties held on that date. ATED is an annual charge of up to £237,400 per year (as at ATED tax year 2021/22), calculated by reference to real estate value bands. Rates increase in line with the Consumer Prices Index each year. Relief may be claimed by NNPs carrying on real estate development or using real estate for commercial renting to third parties, commercial trade purposes or as employee accommodation. Conditions apply. • ATED-related Capital Gains Tax ( ATED- related CGT ) has been abolished for disposals on or after 6 April 2019, in light of the extension of CGT (see below). • For interests in UK land (residential or commercial) owned by non-resident individuals or trustees, Non-Resident Capital Gains Tax ( NRCGT ) may be payable at rates of either 18% or 28% (residential property) or 10% / 20% (non- residential property) (rate depends on total UK income and gains) on gains realised on a disposal of the real estate. Main home relief may be available to exempt some or all of the gain if relevant conditions are met. • Disposals of interests in UK land (residential or commercial) directly owned by non-resident companies are subject to UK corporation tax. The current rate of corporation tax is 19%. No main home relief can be claimed. • From 6 April 2019, disposals of assets deriving at least 75% of their value from

UK land (commercial or residential) by non-resident persons who have a substantial (25%) indirect interest in the land are also chargeable to NRCGT or corporation rate (other conditions apply). For example, disposals of shares in ‘property rich’ offshore companies are caught. • In certain situations, re-basing of assets to their 5 April 2019 market value will be applied automatically unless an election is made. • From 6 April 2020, disposals of UK residential property interests must be reported, and any CGT paid within 30 days of completion. • Income tax ( IT ) is payable by individuals on rental income. Various deductions are permitted against rental income, including interest payable on a loan to purchase or improve the real estate. However, from 6 April 2017 a phased withdrawal of interest deductibility applies to individuals (but not companies). Capital allowances may also be available for commercial real estate. • UK resident companies are liable to corporation tax on their profits (rental income, capital gains or trading income). As from 6 April 2020, non-UK resident companies are subject to corporation tax on income deriving from UK properties. • Inheritance tax ( IHT ). Non-UK domiciled individuals are liable to IHT on their UK situated assets, which includes UK real estate. Holding UK situated assets on death, or gifting them in lifetime, can give rise to IHT liabilities of 20% or 40%, based on the open market value of the asset or, in relation to lifetime gifts, the loss in value caused to the giver’s estate

ILN Real Estate Group – Buying and Selling Real Estate Series

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