In recent years the UK Government has introduced a number of changes to tax legislation that have gradually eroded the benefits of holding UK residential property in Offshore trust and corporate structures for non-UK resident or domiciled individuals. These changes have coincided with a boom in the London property market driven primarily by overseas investors. The changes have allowed the UK Government to increase their tax take without imposing new or additional taxes on UK resident voters.
After initially targeting only properties valued at more than GBP £2 million, the ability to avoid Capital Gains Tax (“CGT”) on the disposal of all UK residential property was removed with effect from 6th April 2015. All disposals of UK residential property by overseas owners now require the submission of a CGT return in the UK, although only gains in value since April 2015 are taxable.
The latest developments announced in the UK Budget in July 2015 propose further changes that will introduce UK Inheritance Tax (“IHT”) charges on all UK residential properties, even those owned by non-UK domiciled individuals and properties owned through a structure such as an offshore company or an excluded property trust.
The IHT proposals remain subject to consultation and are not expected to become effective until 2017, but it is sensible for any clients with UK residential property to begin planning how they will deal with these proposed changes. Peregrine has many years of experience in managing structures holding UK property and we are working with our partners to develop potential solutions for our property clients.
Please contact me at [email protected] or call +44 (0) 1624 626586 should you have any questions about the changes to UK property taxation or if you would like to learn more about how the recent changes (active and proposed) might affect you.
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