Draft legislation came out on Friday 6 July, providing some eagerly-awaited additional details as to how the new rules for taxing gains on disposals of commercial property held by non-residents will work. For details of the announcements, see our insights article. Disappointingly, there was no draft legislation detailing the application of exemptions for institutional investors or collective investment vehicles (CIVs), although HMRC did publish a statement of principles as part of its summary of responses to the consultation on the proposals launched last November.
Clarity will be provided at some point after 31 August, following technical consultation on the draft legislation and once the details on CIVs and exempt investors are confirmed. We expect further draft legislation in the autumn but the new rules will take effect from April 2019, as expected, so it is worth making sure your business is as ready as possible when the changes come in.
There are a few things you can be doing now to prepare:
- Plan for rebasing of property values at April 2019, including the practicalities and timing of a valuation
- Consider carrying out refurbishment works, tenant rent reviews and re-gearing of leases before April 2019, to ensure any increase in value is reflected in the April 2019 rebased value
- Understand your investor base – in particular, has any investor had a 25% or more holding in the entity being disposed of at any point in the last two years?
- Understand your structure – in particular, does your company derive 75% or more of its gross asset value from UK property (termed a ‘property rich entity’)
- Prepare for the new record-keeping requirements, eg keep a rolling record of investors and their percentage holdings for at least a two year period
The rules are complex. If you require support understanding the application of the rules to your structure or are planning an acquisition, get in touch to find out more.