See the 'Related links' section for Stonor v IRC, a longer article on the taxation of UK property.
From 1 April 2013, there will also be a new annual charge, annual residential property tax (ARPT), for non-natural persons whether they are UK or non-UK resident. The annual charge will be based on the value at 1 April 2012 (or acquisition if later) of the property in question, which will be re-valued every five years and also on a change of ownership. The charge is as follows:
A developer company will be excluded from the charge if it acquires the property in the course of 'bona fide property development', for the sole purpose of developing and re-selling the land and the company has carried on the business for two years before the purchase.
The aim of this legislation is to counteract the avoidance of tax by non-domiciled individuals putting property into an offshore company, so that the asset is non-UK situs and therefore excluded property for inheritance tax.
A new capital gains tax charge on the sale of UK residential property is to be introduced where the UK property is owned by non-UK resident 'non-natural persons' and UK resident non-natural persons. This applies for disposals made after 6 April 2013.
The legislation is only to apply to properties valued in excess of £2 million and will apply to all property regardless of its use.
There is also a charge on the disposal of assets where more than 50 per cent of the value derives from UK residential property.
Principal private residence relief is available, for example on disposals by non-resident trustees or personal representatives of deceased persons' estates.
Non-legislative, but still a change, HMRC have announced that, following the decision in Stonor v IRC where property is disposed of within three years of death at a figure higher than probate value, they will not permit the taxpayer to elect for the higher value to be substituted for probate value. This had been permitted previously.
The Upper Tribunal has overturned the First-tier Tribunal's decision in the case of HMRC v Pawson [2013] (UKUT 050 (TCC). The decision was that inheritance tax business property relief is not available for a 'furnished holiday let'.
See Related Links for more details.