We are likely to see further tax changes announced in the Autumn Statement in relation to the taxation of property. This follows a period of consultation. Capital gains tax is to be extended to overseas holders of residential property in an effort to equalise the tax treatment between residents and non-residents.
We are expecting the change to be introduced with effect from April 2015. The aim will be to capture gains arising after that date, although the mechanism to achieve that has yet to be determined. It will either be on a valuation basis (as at April 2015) or on a time apportionment basis.
The Treasury is sensitive not to cause the institutional market in residential property investment to dry up. It is therefore expected that specific exemptions will apply to investment vehicles. This is expected to operate to bring into charge companies and funds which are closely held. The aim is to ensure that diversely held investment companies and funds will not be affected.
There will be further detail for HMRC to work through. They will need to determine how the principal private residence exemption should apply and whether to implement some kind of withholding tax (or equivalent structure).
It is worth noting that the legislation will need to ensure that it does not discriminate against non-residents (as compared to residents). This is on account of EU law. We might therefore find that some new themes will flow through to UK residents as well as applying to non-residents.