Page 40 - Property Portfolio - August 2019

How much will a UK

property cost you in taxes?

Annual tax on enveloped dwellings (ATED)
By Steven Langford, Partner, Residential properties that are not directly
Blevins Franks owned by an individual (or trust) – known as
‘enveloped’ property – come under the ATED
Whether for practical, sentimental or financial regime. This includes homes owned or part-
reasons, many British expatriates keep hold of owned by a company, collective investment
a house in the UK. But over recent years, the scheme or partnership (where one partner is a
tax burden has increased for most UK property company).
owners, with non-UK residents facing some taxes
for the first time. When ATED began in 2013, it only applied to
enveloped properties worth over £2 million, but
If you have UK property but live in Spain, make by April 2016 the valuation band had dropped
sure you fully understand the tax costs. to £500,000 – where it remains today. Current
ATED rates range from £3,650 per year to
Capital gains tax £232,350 for properties worth £20 million+.
For a long time, expatriates generally did not
come into firing range for UK capital gains tax The widening of the NRCGT regime has
when selling UK property. been accompanied by the abolition of ATED-
related capital gains tax; a former 28% charge
Then, in 2015, non-UK resident individuals on gain from residential property within the
and trusts disposing of UK residential property ATED regime. Since 6 April 2019, companies
became subject to ‘non-resident capital gains tax’ disposing of UK property will instead be charged
(NRCGT). This brought charges of 18% or 28% corporation tax on their gains, currently at 19%.
on growth accrued since 6 April 2015.
Inheritance tax
This year, NRCGT was extended to include In April 2017, UK residential property owned
disposals of commercial UK property, UK land through certain offshore structures moved into
and indirect disposals of substantial interests in the scope of UK inheritance tax. This change
“UK property-rich entities”, unless an exemption particularly affected ‘excluded property’ trusts
applies. Where an asset is brought into NRCGT owning residential property in the UK (directly
for the first time as a result of these changes, it or indirectly).
will be rebased to its April 2019 market value.
Assets already in the scope of NRCGT will Now, non-UK domiciles who hold a UK
continue to be rebased to April 2015. residential property through an offshore

40 Portfolio