6 April 2019 non-resident capital gains tax can be good news!

The issue

From 1 April 2019 for companies and 6 April 2019 for individuals, non-residential property was brought within the scope of UK capital gains tax (residential property has been within the scope since  April 2015). Generally, this was bad news as it meant that some non-residents would face a tax charge on UK property disposals that they would not have faced previously. The silver lining around the cloud was that generally only gains after 6 April 2019 would be taxable. Therefore there will only be a gain if disposal proceeds of a property exceed their April 2019 value.

These rules were not bad news for everyone……

Companies becoming UK resident

Before the 2019 rules came in, a big disincentive for an offshore company to become UK resident (by for example moving its central management and control to the UK) was that all of any future gains would be subject to UK tax. Although you may think that it would be reasonable for assets to be rebased to market value on a company’s entry to the UK this is not how things work. The good news for offshore companies which now wish to move to the UK is that as long as they become UK resident after 5 April 2019, any UK properties that they held when they entered the UK can still be rebased to 1 April 2017.

Forbes Dawson comment

Only UK property will be rebased in this way when non-UK companies ‘arrive’ in the UK. This means that companies which hold UK and foreign property will still face the prospect of all of the foreign property gain being subject to tax on a disposal. This is a rare case of the UK tax system having a greater claim to tax gains on foreign assets rather than UK assets. In many cases, this point may be academic if the overseas jurisdiction has taxing rights which trump the UK.




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