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Tax
to realise gains on UK residential property free of UK tax.
The charge applies to gains from April 2015 and owners have a choice how to calculate this. The standard approach is by using an April 2015 market value as the base cost, so some owners have already been obtaining valuations. The gain must be report- ed to HMRC on the annual Return. The current CGT rates are: • For non-resident individuals – 18% or 28% depending on the level of taxable income and gains (with an annual exemption being available, £11,100 for 2015/16). • For non-resident trustees - 28% (with half the annual exemption above). • For non-resident companies (not already within ATED) - 20%.
There are exemptions, which include non-UK pension schemes.
UK Inheritance Tax (IHT)
IHT is charged on transfers of value. It is most often paid on estates on death but can also be due on gifts made during lifetime and on certain transfers made in to and out of trusts. There are various exemptions and reliefs.
Generally the scope of IHT is 2016 this threshold will be £500,000. The determined by where an individual is reduction in this threshold coupled with an
domiciled, which very broadly means where their permanent home is. Historically UK domiciled individuals are liable to IHT on their worldwide estate, with non-UK domi- ciled individuals generally only liable on UK sited assets. Therefore if a non-domiciled individual owns shares in a Gibraltar company which owns UK property, the assets in his hands (i.e. the shares) are non-UK sited and therefore the value is outside the scope of IHT.
However on 8th July 2015, the UK Government announced that from 6 April 2017 UK residential property held directly or indirectly by non-domiciled individuals will become subject to IHT. This change will apply to all residential property, whether occupied or let and whatever value.
Annual Tax on Enveloped Dwellings (ATED) In April 2013 ATED was first applied to high value UK residential property owned by a company. Currently this applies to properties valued at more than £1 million, from April
accelerating property market could soon mean that an ATED charge has to be considered in relation to all UK residential property held in enveloped structures.
The ATED charge is based on property value and currently ranges from £7,000 to £218,200 per annum. There are a number of reliefs, for example if the property is let to a third party on a commercial basis or if it is part of a property trading business. There is also a 28% ATED related CGT charge on capital gains.
In summary, now may be a good time to review current structuring, to address those changes which have already occurred and plan ahead for those which lie not far away on the horizon. With increasing transparency and enforcement powers internationally, the need for comprehensive tax advice will inevitably grow exponentially.
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