UK: UK Real Estate Held By Non-Residents: Budget 2017 Changes

Last Updated: 4 December 2017
Article by Terence Pay

The Chancellor of the Exchequer, Philip Hammond, presented his Autumn Budget to Parliament on 22nd November 2017. One surprise announcement was the intention to bring UK commercial property gains made by non-residents within the charge to UK tax with effect from April 2019.

The Consultation document was released on the same day, setting out the main features of the proposals. The government's intention is to broaden the existing regime that applies to disposals of residential property to create a single capital gains tax regime for both UK commercial and residential property disposals by non-residents.

This briefing provides an overview of the measures proposed.

Direct Disposals of UK Real Estate

From April 2019, non-resident individuals and companies will be subject to capital gains tax on the disposal of UK commercial property. Currently, non-residents are only subject to UK tax on disposals of UK residential property.

Commercial property values will be rebased to April 2019, so that only the gain arising from that date will be chargeable to tax. There will be an option to calculate the gain (or loss) using the original acquisition cost, and this may be useful where a property is standing at a loss.


The tax rates for gains arising on direct disposals of commercial property will be the same as for residential property. For individuals, trustees and partnerships, the rate is 18% where the gain falls within the basic rate band, and 28% on the excess.


Where a company disposes of UK commercial property, the gain will be subject to UK corporation tax (currently 19%). This is the same rate that currently applies to residential property gains realised by non-resident companies not within the charge to ATED (Annual Tax on Enveloped Dwellings).

Companies (or other 'non-natural persons') that hold UK residential property within the charge to ATED are charged to ATED-CGT at 28%. The government is seeking views on how to harmonise ATED-CGT with the wider regime for taxing non-residents on UK property gains.

Collective Investment Schemes

At present, gains on disposals of UK residential property made by widely-held companies resident outside the UK are not subject to capital gains tax. From April 2019, disposals of all real estate made by non-resident funds will fall within the charge to corporation tax, but only on the portion of the gain arising after April 2019.

Persons currently exempt from capital gains tax, such as pension funds, will remain exempt from these new rules.


Under the new regime, losses realised on residential property can be offset against gains on commercial property and vice versa. Group relief will be available for losses realised by a group company.

Indirect Disposals of UK Real Estate

An indirect disposal is a disposal of an interest in an entity that holds UK real estate (whether commercial or residential property). This will include a disposal of shares in a company (or holding company) that owns UK real estate, an interest in a partnership or an interest in settled property deriving its value from UK land.

For there to be an indirect disposal of immovable property, two conditions need to be satisfied:

  1. The entity must be 'property rich' (broadly, where 75% or more of its gross asset value at disposal is represented by UK real estate). The 75% test is solely based on the assets of the company and is not reduced by liabilities.
  2. The non-resident must hold an interest of 25% or more in the entity at the date of disposal, or at any point within the previous five years. When considering whether the 25% limit is met, interests held by related parties at any point within the previous five years are taken into account. The term 'related party' will be widely defined to include relatives and other persons coming together as a group to invest.

The value of the interest in the entity (e.g. the shares), rather than the property itself, will be rebased to April 2019 so that the gain is calculated by reference to the increase in value of the interest in the real estate entity rather than by reference to the increase in the value of the real estate itself.

This rebasing to April 2019 will be the only calculation method for indirect disposals of property rich entities. There will be no option to calculate the gain on a time apportioned basis. It will therefore be important to obtain a valuation of all indirect interests in UK real estate as at April 2019.

Disposals by non-residents of interests in UK funds (REITs, PAIFs and EUUTs) will come within the scope of UK capital gains tax from April 2019, provided the property rich and ownership threshold tests are met.

Tax Treaties

Some tax treaties override the UK's domestic taxing rights on disposals of UK property (e.g. where held in an overseas partnership or where gains realised on the disposal of shares of UK property holding companies are taxed only in the country of residence). To prevent the use of double tax treaties ('treaty shopping') to avoid a charge to UK tax, anti-forestalling measures will be introduced to prevent arrangements being entered into on or after 22 November 2017 that involve the abuse of a double tax treaty to circumvent the rules.

The government also plans to re-negotiate treaties so that the UK's taxing rights are preserved on disposals involving UK land.


UK advisers who are aware that a disposal of an interest in UK property has taken place will be required to report the transaction to HMRC, unless the adviser has proof that the transaction has already been reported.

What now?

The Consultation closes on 16 February 2018 and draft legislation is expected in late summer 2018. We are not expecting significant changes after the Consultation has ended, as the government has made it clear that some aspects of the changes are fixed, such as the scope, commencement date and core features of the direct and indirect disposal provisions.

Non-residents who currently own UK real estate through structures should take professional advice to ensure that they understand the impact of the proposals, as well as potential investors considering acquisitions of UK real estate.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Michael Kyprianou Advocates & Legal Consultants
In association with
Practice Guides
by Mondaq Advice Centres
Relevancy Powered by MondaqAI
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Michael Kyprianou Advocates & Legal Consultants
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions