Planned changes to the tax system will mean non-UK residents will be taxed on future gains made from disposing of residential property investments. Currently, there is no capital gains tax (CGT) for non-UK residential property owners.
Chas Roy-Chowdhury, ACCA’s head of taxation, said: 'The UK Government is trying to level the playing field in CGT relating to residential property. Currently, non-UK residents do not pay CGT when disposing of UK residential property investments. The plan is to introduce a new tax regime that means they will have to pay it. However, this change will not be immediate. The UK government will start looking at how best to make this change in April 2014.
'London, which is a property investment hotspot, can expect to see overseas investors move away from residential property investments and look to make the most of their tax free gains before any changes come into effect.'
Exchange Traded Funds
The UK Government’s Chancellor of the Exchequer, who presented his Autumn Statement on December 5, has also looked to make the UK more attractive to companies with Exchange Traded Funds (ETFs) to be based in London by removing the 0.5 per cent Stamp Duty Reserve Tax on purchases of shares in ETFs.
Chas Roy-Chowdhury said: 'London is seen as the epicentre of ETF trading in Europe already, but the current stamp duty means most are actually based outside the UK in order to avoid the tax. Plans to remove it will hopefully open the way for ETFs to be based in the UK and strengthen London’s position as the hub of ETF activity.
'The UK Government has made a lot of cracking down on corporation tax avoidance in recent months, but it is always looking to make the UK more attractive to overseas investors. The ETF change, due to come in next year (April 2014) is the latest incentive to turn the UK into a magnet of international investment. Earlier in 2013 we saw the Government abolish stamp duty on AIM and ISDX quoted shares, as well as announce a cut to corporation tax to 20 per cent by 2015.'
Plans to tackle tax avoidance were also announced in the Autumn Statement but with detail yet to be announced.
Chas Roy-Chowdhury said: 'There was a lot of rhetoric on tax avoidance, but until any concrete proposals emerge we won’t know how that impacts on overseas investors or controlled foreign companies (CFCs). However, what was noticeable was a lack of reference by the UK Chancellor to (base erosion profit shifting) BEPS. Rather than look at the international drive currently underway to tackle this issue, the Autumn Statement was geared to the UK audiences.'