Can Landlords Meet The 30-Day Deadline?
Apart from asking non-resident landlords to fork over a substantial portion of the sale of their property or asset, they’re also required to do this within 30 days of the sale. For sellers, this means that apart from fees payable to all the third parties involved and taxes already paid over to the government when the property was purchased, they now have to do all of this plus meet a steep deadline. Investors may have to rely on their financial institutions for bridging finance until the matter is resolved, or face steep penalties. According to ATT technical steering group co-chair, Jon Stride, “But even if there is no tax due, or a property is sold at a loss, there is still a requirement to file a non-resident Capital Gains Tax return within 30 days or face penalties.”
UK No Longer The Commercial Property Tax Haven
Land rich companies who thought of diverting their sales to third parties in order to avoid these taxes are in for a shocker, as legislation has already made provision for this. For landlords and property-owning companies who don’t call the UK their home, the lure of properties is dwindling. But it’s not just properties that seem to be under the scrutiny of parliament, as funds and a substantial share in businesses also seem to be under the same microscopic lens. For investors who were thinking of purchasing an asset in the UK, the total costs need to be calculated and compared with properties elsewhere in the world.
A Mass Exodus Of Investments Amidst Brexit
If parliament was relying on outside investment to give the local property market a boost, this additional taxation places quite the damper on that. Parliament is scrambling to hold onto their investments as investors are selling their stakes in UK property funds. This last-minute initiative is meant to encourage investors to stay and while it may work as a short-term solution, they may lose new investments to countries with more relaxed foreign investment rules. For investors the lure of potentially high rentals or a substantial profit at the sale might not be enough to divert their funds back to the UK. On a more positive note, it does leave more properties open for UK citizens who wish to enter the property market, whether for the first time or as an investment.
Additional tax liability for non-UK residents might just be the tipping point for investors to look for opportunities elsewhere. For the UK, what starts off as a quick win might end up in a total loss.
Author: Sandy Kenrick
Sandy Kenrick swapped a fast-paced career as business banker for the insurance industry. Long hours and a new family quickly led her to look beyond the world of finance. As a work from home mom, Sandy now gets to do what she loves. Much of her work still involves finance and business, but when that mid-afternoon sun swings around it’s time to switch off the laptop, pour a glass of wine, and enjoy her growing family.