From April 2019, all disposals of UK property by non-residents will become subject to CGT, as will disposals of indirect interests in such property (for example, the sale of shares in a ‘property-rich’ company).
The indirect disposal rules will apply where a person makes a disposal of an entity that derives 75% or more of its gross asset value from UK land. There will be an exemption for investors in such entities who hold less than a 25% interest. The gains on indirect disposals will be calculated using the value of the asset being disposed of, rather than the value of the underlying UK land.
The 75% property richness test will look at the gross assets of the entity being disposed of. Where a number of entities are disposed of in one arrangement, their assets will be aggregated to establish whether the 75% test is met. Any assets that are the counterpart to a liability in another entity in the arrangement will not be included – for example, an intra-group loan credit balance in an entity would not be considered where the debtor is disposed of in the same arrangement.
Gains on commercial property and indirect interests in all types of property will be rebased to April 2019, so that only the element of gain accruing from that date is taxable.
Tax will be due at the same rate as an equivalent disposal by a UK resident.
Under the substantial shareholding exemption (SSE), any gain on a sale of shares by a UK company is tax exempt if, broadly, the selling company held a ‘substantial shareholding’ (generally, at least a 10% interest) in the company whose shares are being sold, subject to various other conditions being satisfied – see blog Opco-Propco structures – still beneficial or changes needed?
Please note that there is no exemption equivalent to the SSE on an asset sale (although, on an asset sale, available capital losses can be offset against any gains made on the sale).
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