Legislation proposes taxing non-UK property companies

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Draft legislation published this month confirms the government’s intentions to change the way non-UK property companies that own property in the UK are taxed. Under current legislation, overseas property investors pay income tax, but the new legislation will require them to pay corporation tax. When properties are sold, overseas property owners will be pay capital gains tax.

The legislation also covers UK residents who register their property business overseas.

Richard Croker, a tax expert, commented:

“The legislation levels the playing field between UK and non-UK resident property companies as regards tax on UK property income and associated finance costs and derivatives.”

Another change is that non-UK residents who own UK property and who fill in paper tax forms will be required to use online forms.

There will be some exemptions. Double tax treaties with countries may exempt some property owners on the grounds that they should not pay both taxes in the UK and their own country.

The draft legislation is in the consultation process, with any interested parties invited to comment on them. A Finance Bill is expected to be introduced in 2019 that contains tax changes for non-UK property owners. This is expected to become law in April 2020.

It is possible that the tax changes could deter some overseas investors because of the increased tax cost and the extra administration needed.

The changes will not affect most UK-based property owners and should not affect the cost of commercial mortgages for either UK or non-UK residents.

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