UK tax on gains for non-UK residents
Gains on the disposal of non-residential UK real estate are currently tax free for non-UK resident investors. Gains accruing from April 2019 are expected to be taxed at a rate of 19% (17% from April 2020) for non-UK resident companies.
UK tax on income
Net rental income after deductions (see below) is chargeable to UK tax and calculated on an accruals basis. Offshore companies are currently subject to tax at 20% (17% expected from April 2020).
Annual tax on enveloped dwellings (ATED)
An annual tax can apply to dwellings worth over £500,000 owned other than by individuals. The liability depends on the valuation band of each dwelling and ranges from £3,600 (at a value of £500,001) to £226,950 (at values exceeding £20m).
In general, rental profits and losses across properties of a single entity are offset. Where an overall loss arises in any year, this is carried forward for future relief, but such relief may be spread over several years.
Tax administration: non-resident landlord scheme
Non-resident companies letting UK property are likely to be required to register for corporation tax from April 2020.
Stamp duty land tax (SDLT)
SDLT is currently chargeable on the acquisition of property in England, Wales and Northern Ireland.
Most commercial property is charged to SDLT at progressive rates of up to 5%. Most residential property is charged at progressive rates of up to 12% but in many cases these rates will be increased by an additional 3% – eg for all purchases by companies and for purchases by individuals where the individual owns more than one residential property following the transaction. Residential property acquired for consideration in excess of £500,000 and owned other than by an individual can be charged to SDLT at 15% where a charge to the ATED arises.