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Tax
UK Residential Property Tax Changes
By Lynette Chaudhary, International Tax Manager, STM Fiscalis Ltd
Anumber of Gibraltar residents (individuals/companies/trusts) own UK residential property.
Gibraltar does not tax foreign rental profits and neither does it levy Capital Gains Tax (CGT). The tax position is somewhat different in the UK though: • The UK taxes UK rental profits even if the owner of the property is not UK resident. • From 6 April 2015 it also levies CGT on non-UK residents on the disposal of UK residential properties. • From 6 April 2017 all UK residential property will be subject to UK Inheritance Tax (IHT), currently certain non-domiciled
individuals may not be liable to this. The UK is clearly extending its grip on the taxation of UK residential property and keeping up to date with the rapid pace of legislative change can pose considerable
challenges.
UK Income Tax
If the property is rented out, the rent less allowable expenses is liable to UK Income Tax. This remains the case even in the hands of a non-UK resident.
In the UK, there is a requirement for 20% tax to be withheld (by either tenant or agent) on rent paid to a non-UK resident. However, it is possible for a non-resident owner to register as a Non Resident Landlord (NRL) with HMRC. This enables the owner to receive the rent in full, achieving an important cash-flow advantage. However this does not mean that the rent is exempt from UK tax (a common misconception). The liability to tax on the rental profits remains in a NRLs hands, and an annual Self Assessment
UK Tax Return (“Return”) must be filed. The current Income Tax rates are:
• For non-resident individuals – 20%, 40% or 45% depending on the level of taxable income (currently with a standard personal allowance of £10,600 for 2015/16, whether and to what extent non-residents continue to have entitlement to UK personal allowances in the future is under review).
• For non-resident trustees (for most discretionary/accumulation trusts and most pension schemes) - 20% on the first £1,000 of taxable income, then 45% on all other (non- dividend) UK income.
• For non-resident companies (not already within ATED, see below) - 20%.
UK Capital Gains Tax (CGT)
From 6 April 2015 disposals of an interest in UK residential property by non-UK resident owners will be liable to CGT if not already liable to ATED related CGT (see below). This is a significant change to the previous regime which, generally, allowed non-UK residents
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Gibraltar International
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