The extended NRCGT regime will apply to both direct and indirect disposals of UK land made on or after 6 April 2019, bringing the disposal of commercial investment property and shareholdings in property rich companies by non-residents within the charge to UK tax for the first time.
It is expected that the impact on businesses will be significant, with a substantial increase in the number of non-residents affected by the new rules.
The regime will bring with it a new layer of compliance for non-residents. While the timeframe to report and make payment of any tax will be very tight for some non-UK persons, the compliance regime will, somewhat surprisingly, be much more relaxed than first expected for non-resident companies.
Under Sch 2 of Finance Bill 2019, the compliance regime will require reporting and payment of any related tax on the disposal within 30 days from the date of completion (as is the case under the existing NRCGT rules).
At the time that the draft legislation was published in July 2018, the reporting requirement was due to apply to all direct and indirect disposals of UK land, regardless of the type of non-resident person making the disposal. Therefore, both companies and non-corporate persons were due to be affected.
Under the draft legislation, the obligation to pay was only to apply to those persons subject to CGT. For disposals made by non-resident companies, the payment on account provisions were to be delayed, with the commencement date to be appointed under Treasury instrument.
However, in a somewhat surprising but welcome relaxation for non-resident companies, the 30 day reporting and payment on account provisions have been dropped in the latest version of the Finance Bill.
The wording of Sch 2 is now drafted so as to apply only to non-residents that are subject to CGT. Non-resident companies will not be subject to the new NRCGT compliance regime but will instead be due to report and pay any related tax under normal corporation tax self-assessment rules.
In addition, while the requirement to report the disposal and make a payment on account within 30 days of completion will be extended for CGT purposes from 6 April 2020 to include UK residents making residential property gains, no new requirements will apply to companies from that date.
It should be noted that this is only the position applicable for disposals made on or after 6 April 2019. For disposals made before that date, the NRCGT rules (under FA 2015) in relation to direct disposals of UK residential property still apply.
The restriction in the application of the new NRCGT regime to those persons subject to CGT will be very much welcomed by non-resident companies, particularly those having to also get to grips with the complexities of the changes to the non-resident landlord scheme due from 6 April 2020.
There will also be a notable benefit, from a reporting perspective, for those non-resident companies holding UK residential land already within the scope of the FA 2015 NRCGT regime. Such companies will have a much longer time to pay and report any tax on NRCGT disposals, provided they are made on or after 6 April 2019.
The complexities of the new NRCGT regime will undoubtedly prove a headache for non-resident taxpayers, particularly in the case of indirect disposals. However, the concession in compliance obligations will offer some solace to non-resident companies and hopefully allow adequate time to fully meet their obligations under the new NRCGT regime.
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Compliance under the new NRCGT regime
The extended NRCGT regime will apply to both direct and indirect disposals of UK land made on or after 6 April 2019, bringing the disposal of commercial investment property and shareholdings in property rich companies by non-residents within the charge to UK tax for the first time.
It is expected that the impact on businesses will be significant, with a substantial increase in the number of non-residents affected by the new rules.
The regime will bring with it a new layer of compliance for non-residents. While the timeframe to report and make payment of any tax will be very tight for some non-UK persons, the compliance regime will, somewhat surprisingly, be much more relaxed than first expected for non-resident companies.
Under Sch 2 of Finance Bill 2019, the compliance regime will require reporting and payment of any related tax on the disposal within 30 days from the date of completion (as is the case under the existing NRCGT rules).
At the time that the draft legislation was published in July 2018, the reporting requirement was due to apply to all direct and indirect disposals of UK land, regardless of the type of non-resident person making the disposal. Therefore, both companies and non-corporate persons were due to be affected.
Under the draft legislation, the obligation to pay was only to apply to those persons subject to CGT. For disposals made by non-resident companies, the payment on account provisions were to be delayed, with the commencement date to be appointed under Treasury instrument.
However, in a somewhat surprising but welcome relaxation for non-resident companies, the 30 day reporting and payment on account provisions have been dropped in the latest version of the Finance Bill.
The wording of Sch 2 is now drafted so as to apply only to non-residents that are subject to CGT. Non-resident companies will not be subject to the new NRCGT compliance regime but will instead be due to report and pay any related tax under normal corporation tax self-assessment rules.
In addition, while the requirement to report the disposal and make a payment on account within 30 days of completion will be extended for CGT purposes from 6 April 2020 to include UK residents making residential property gains, no new requirements will apply to companies from that date.
It should be noted that this is only the position applicable for disposals made on or after 6 April 2019. For disposals made before that date, the NRCGT rules (under FA 2015) in relation to direct disposals of UK residential property still apply.
The restriction in the application of the new NRCGT regime to those persons subject to CGT will be very much welcomed by non-resident companies, particularly those having to also get to grips with the complexities of the changes to the non-resident landlord scheme due from 6 April 2020.
There will also be a notable benefit, from a reporting perspective, for those non-resident companies holding UK residential land already within the scope of the FA 2015 NRCGT regime. Such companies will have a much longer time to pay and report any tax on NRCGT disposals, provided they are made on or after 6 April 2019.
The complexities of the new NRCGT regime will undoubtedly prove a headache for non-resident taxpayers, particularly in the case of indirect disposals. However, the concession in compliance obligations will offer some solace to non-resident companies and hopefully allow adequate time to fully meet their obligations under the new NRCGT regime.
