A plot of UK land (non residential) is being sold. It has multiple UK and overseas owners (having formerly been held in a trust that has ended). What UK CGT rules will apply to the gains apportioned to the overseas residents?
Since 6 April 2019 gains arising from disposals of all UK land and property, whether direct or non-direct (i.e. land owned through a corporate wrapper) must be reported to HMRC, unless main residence relief applies (not relevant here, nor the new corporation tax rules for NR corporate owners) and, as was previously the case, non-UK residents must report, even if they realise a loss. See HMRC guidance:
When did the trust end and should the trustees not have reported this to HMRC at the time, since an appointment out of trust is a disposal for CGT? There may also have potentially been IHT exit charge implications, depending on the value involved.
The rate of CGT on UK non-residential land is 10% or 20% (or a mixture) depending on income and availability of personal allowances
Maxine
The express trust ended many decades ago and the land has since been held under a bare trust arrangement on behalf of numerous beneficiaries. I was primarily concerned with the how the UK CGT rules apply to the overseas resident beneficiaries. The link you provided to HMRC’s website appears to set this out quite clearly so I will forward that to the relevant beneficiaries. Thank you.
It appears from a quick read of HMRC’s website that double taxation treaties may have priority over the the general tax rules applying to disposals of UK land by non-UK residents. Is that correct?
Andy
Yes double tax treaties may well affect the computation and whether any tax is due - but as previously noted, non-UK residents must still report any UK land disposals even if there is no tax. the reporting deadline was recently extended from 30 days to 60 days and I have found that it is easier for non residents to get a paper form to complete from HMRC, particularly as they often fail the verification checks required to set up a digital UK property disposal account.
Subject to all of the previous comments made by Maxine Higgins, I thought it should just be clarified that non-residents are only subject to UK tax against commercial property disposals in respect of the gain accruing since 06/04/2019 – i.e. the land will need to be valued as at 06/04/2019 and tax will be due only upon the uplift since that date.
Paul Storrie
Storrie and Company
I’m not sure what you mean by “commercial” property disposals. This is a plot of land sold with planning permission to a house builder. Does that qualify?
Also, are you saying that any double tax treaty rules on gains arising from UK land disposals are over-ridden by the new rule that only gains arising since 06/04/2019 are chargeable on overseas residents?
Andy
You identified the land as non residential in the initial email.
My understanding of the general operation of most double tax agreements is that the overseas tax suffered will be allowed as a credit against any tax due in the country where the seller is actually tax resident. That is to say, in this particular instance, as regards the non-UK resident sellers, the UK will look to levy tax against the disposal based upon the UK rules as will the country in which the seller is resident, based upon that country’s tax rules – any tax treaty between the two countries may permit an offset of the former against the latter.
Paul Storrie
Storrie and Company
Thanks for the clarification Paul.
With respect to disposals of UK land by non-UK residents none of the UK double tax treaties (as far as I recall) override the UK’s domestic tax provisions. In other words, the UK has primary taxing rights over the land with the country of residence of the vendor typically also levying its local tax albeit with an offsetting credit for any UK tax paid.
Malcolm Finney
Thank you Malcolm for your additional clarification.