Hidden in the small print, it is announced that non-resident landlords (NRLs) owning UK property will be brought within the scope of UK corporation tax on gains.
This will come as a major shock for foreign investors in the UK and will undoubtedly have huge ramifications for investment decisions in the UK, at a time when Brexit uncertainty is already creating nervousness for investors in the UK. The good news is that there will be an exemption for institutional investors.
The extension of tax on chargeable gains to NRLs includes disposals of interests in property-rich entities. There is also an extension to tax gains on disposals of residential properties by widely-held companies (previously exempted).
A technical note has also been published setting out transitional arrangements and an anti-forestalling rule which will apply from the date of the Budget.
This is a swift U-turn on comments made during a recent consultation on NRLs only last year that non-residents' gains would not be brought within the scope of corporation tax. The response to that consultation has not yet even been published, although the government have announced that the response will be published shortly.
While the key features, scope and commencement date are fixed, the government has issued a consultation paper to ensure that the legislation is "effectively targeted" and does not place "unnecessary burden" on taxpayers. The date for responding to the consultation is 16 February 2018.
Taxing gains made by non-residents on immovable property – To align the UK with other countries and remove an advantage which non-residents have over UK residents, all gains on non-resident disposals of UK property will be brought within the scope of UK tax. This will apply to gains accrued on or after April 2019. The government intends to include targeted exemptions for institutional investors such as pension funds. (52)