When UK property is held by overseas landlords, the rental income should be taxed in the UK, but any gains made on selling the property often escape UK tax. Since 6 April 2015 nonresident individuals and private companies must pay nonresident capital gains tax (NRCGT) on any gains accrued since that date when they sell UK residential property.
Gains made from selling commercial property and any gain attributed to periods before April 2015 still escape UK tax, which encourage the holding of properties through companies based in tax havens.
The Government is proposing to extend NRCGT to gains made from any type of immovable UK property, when it is sold by nonresident corporations or individuals from April 2019. Only the gain which accrues from April 2019 onwards will be taxed in the UK.
The new tax charge will also apply to indirect property-related gains, where a property-rich entity (one where 75% or more of its gross asset value is represented by UK immovable property) is sold instead of the property it holds.
The NRCGT is charged at the rates which would have applied if the vendor had been resident in the UK when the sale took place. The sale must be reported to HMRC within 30 days of completion, and if the vendor is not already registered with HMRC, the tax must also be paid within 30 days of the sale.