Shipping interests among those affected by draft UK residential property tax changes

 International accountant and shipping consultant Moore Stephens says many overseas companies, including some connected to shipping interests, will be among those affected by draft legislation from the UK government proposing changes to the taxation of UK residential property valued at £2m or more. Among other things, companies resident outside the UK will, for the first time, be liable to capital gains tax (CGT) on such property, with effect from 6 April 2013.

The measures in the draft legislation include CGT at a fixed rate of 28 per cent on  disposals of UK property owned by so-called ‘non-natural persons’ (NNPs), including those resident overseas, and an annual residential property tax (ARPT) on such properties where they are held by NNPs.  Various entities are classed as NNPs, principally companies, but the definition does not include trusts.  This means that a property owned directly by a trust will not be subject to the new charges.

These changes were  announced in the March 2012 UK Budget but, following lobbying, the government has allowed properties to be re-based to 6 April 2013, so that only gains from that date onwards will be caught  by the charge. Non-resident companies will be liable for CGT in respect of any chargeable gain accruing for a period where the property has been liable to ARPT. Previously, companies resident outside the UK were not liable to tax on gains unless they were trading in the UK.

Gill Smith, a tax partner with Moore Stephens, says, “The government’s original proposals would potentially have taxed gains accruing since 1982, and involved the need to consider restructuring before April 2013.  The rebasing to 6 April 2013 has bought a little time, but structures still need to be reviewed and valuations obtained.”

The ARPT will apply to ownership of interests in residential property valued at more than £2m. The charging structure falls into four bands, starting from an annual charge of £15,000 for properties valued between £2m and £5m, and rising to £140,000 for properties valued at more than £20m. Charges will be uprated annually in line with the Consumer Prices Index.

Gill Smith concludes, “The ARPT and CGT charges being introduced are significant.  Structures need to be reviewed to see if restructuring can be undertaken to reduce liabilities. However, care is needed to ensure that other tax charges are not inadvertently triggered.”

Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping and insurance adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 624 offices of independent member firms in over 100 countries, employing 21,224 people and generating revenues in 2012 of $2.3 billion.  www.moorestephens.co.uk

For more information:                                                           

Gill Smith                                                                                 

Moore Stephens LLP 

Tel: + 44 (0)207 334 9191                                                                                                                            gill.smith@moorestephens.com