Draft Legislation Published for new Capital Gains Tax

On January 31st, the UK Government published draft legislation for new capital gains taxes on residential property in the UK. The new charge will be levied on UK and non-UK companies and other “non-natural persons” selling UK residential property which is valued at more than £2 million.

The Capital Gains Tax (CGT) charge was announced in March of 2012 along with a new annual residential property tax (ARPT). These changes to the tax regime are meant to ensure that both UK resident and non-UK resident non-natural persons pay a fair share of taxes in regards to the purchase of high value residential properties.

The legislation states that from April 6, 2013, a 28% CGT charge will apply to gains on disposals of properties by UK and non-UK resident companies, partnerships and collective investment schemes if certain conditions are true. The property must by valued at over £2 million when it is disposed of and the ARPT is payable on the property for any day while it was owned.

Increases in the value of property before April 6 2013 will not be subject to CGT, however, corporation tax will apply for UK companies to the part of any gain built up before April 6 2013. The new CGT charge will not apply to disposals of property by non-UK resident trustees.

Source: www.blplaw.com.