Real Estate Investor Magazine South Africa March 2015 | Page 61

suitable property, including land in the process of
being constructed or adapted for use as a dwelling
and rights to acquire UK residential property ‘off plan’.
Disposals of building land will be outside charge until
a residential property is under construction.
Properties held at 6 April 2015 will be rebased to their
market value. A taxpayer can elect out of the rebasing
so that the whole gain will be time apportioned over
the period of ownership or can elect for no rebasing or
time apportionment.

“CGT will be charged on nonresidents disposing of UK
residential property.”
Time apportionment will not be available if the
property is within the enveloped property regime
(ATED). For such properties, properties are rebased to
5 April 2013 values.
Companies will pay the corporation tax rate of
20% with limited indexation allowance and pooling
available for group companies. If a company leaves a
pooling group, there will be a deemed disposal of the
UK residential property owned by the leaving company.
ATED CGT will continue to apply if ATED related
and any remaining part of the gain outside ATED post
6 April 2015, will be subject to CGT. This will be the
case where an enveloped residential property has been
made available for use by connected individuals and
then let out to a third party.
The ATED rate at 28% remains unchanged. The
CGT charge will take precedence over anti-avoidance
charges which ‘look through’ gains made by non-UK
companies. Individuals will be charged CGT at 18%
or 28% depending on the level of UK source income
and gain. The annual CGT allowance will also be
available. Trustees will be taxed at 28% and will be able
to claim half the annual CGT allowance applicable to
individuals.
Partnerships are generally treated as transparent so
partners will each be charged on their proportion of
the gain as apportioned in accordance with the profit
share arrangement or entitlement.
Losses on UK residential property can be offset
against gains on UK residential property in the same
tax year or carried forward and offset against gains on
UK residential property.
Any disposal will need to be reported within 30 days
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of completion and a payment on account of the tax will
be due at the same time.
With the introduction of the new wider CGT charge
for non-residents with effect from 6 April 2015, it will
become much harder for non-resident individuals,
trustees or closely-held entities to avoid a potential
CGT charge on a disposal of UK residential property,
except where such property may qualify as the main
residence of an individual for the purposes of PPR.
For non-UK resident individuals wishing to invest
in a specific residential property for business purposes,
it will be preferable to set up a company to make the
investment because of the lower rate of corporation tax
(20%) compared with CGT (28%).
Non-residents can register with HMRC in order to
defer payment of the tax due on disposal until the selfassessment return date (which can be up to 18 months
later). As a Non Resident Landlord (NRLS) with
HMRC, ensure you only pay tax on the profits of the
property annually.
The calculation of the CGT may be complex based
on the individual’s circumstances so it will be advisable
for non-resident individuals to obtain a valuation of
their properties at 5 April 2015 and keep record of this,
regardless of their future intentions.

RESOURCES
Smuts & Taylor Ltd
March 2015 SA Real Estate Investor

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