UK Property: Impact of New Tax Rules

UK Property: Impact of New Tax Rules From April 2019 the UK will introduce new tax rules that will affect how UK property (both residential and commercial) and UK property holding structures are taxed. This presentation will give an overview of the changes and compliance issues and look at some examples of how this will impact on UK property holding structures.

UK Property – from 6 April 2019 Non-Resident Capital Gains Tax (“NRCGT”) extended Commercial property “indirect disposals” Taxation of non-resident companies Returns and payments

Inheritance Tax: residential property OFFSHORE UK Non-UK resident and domiciled OFFSHORE TRUST Res £1m Com NON-UK Co NON-UK Co Res £1m Com Res £1m Com

Non-Resident Capital Gains Tax (from 6 April 2019) OFFSHORE UK Non-UK resident and domiciled OFFSHORE TRUST Res £1m Com NON-UK Co NON-UK Co Res £1m Com Res £1m Com

Capital Gains Tax: UK commercial property Non-UK Co 20% NRCGT 19% CT (17% in 2020) OFFSHORE UK Com Com Rebasing

Capital Gains Tax: indirect disposals From 6 April 2019 Indirect disposals (e.g. selling shares) Property rich vehicles (at least 75% property) Holding requirement: 25% 2 year look back includes connected parties Trading exemption (e.g. pubs)

Non-Resident Capital Gains Tax (from 6 April 2019) 20% NRCGT Non-UK Co OFFSHORE UK Portfolio 25 Res Com 10 65

NRCGT: Holding requirement 50% A 25% B 15% C 10% D Non-UK Co OFFSHORE UK Com

Company Structure - rented ATED Exemption Returns Income Tax Net rent NRLS 20% From April 2019 Corporation tax 19% Loan relationships Interest Carried forward losses Non-UK Co OFFSHORE UK RENTED

Company Structure - rented Capital gains Sell property: NRCGT 20% Sell shares: 0% From April 2019 Sell property: corporation tax 19% Sell shares: NRCGT 28% Rebasing Inheritance Tax (“IHT”) Before 6/4/2017 Now Non-UK Co OFFSHORE UK RENTED

Company Structure – not rented ATED >£500k Returns Capital gains Sell property: ATED-related CGT 28% Sell shares: 0% From April 2019 No ATED-related CGT Property: Corporation Tax 19% Shares: NRCGT 28% Rebasing IHT = same Non-UK Co OFFSHORE UK NOT RENTED

Rental Business Now ATED Income Tax – 20% NRCGT – 20% Shares – no CGT IHT From 6 April 2019 Corporation Tax – 19% Capital gains Sale of property – corporation tax: 19% Shares – NRCGT: 28% Rebasing Close company not relevant 25% holdings rule Connected persons 2 year look back IHT – no change Hattie Harry Harvey Henry X 10% 15% 2% 3% 30% A-M Jerseyco 40% Rent Rent Rent

CGT : Returns and Payments on Account on disposal Non-residents - 6 April 2019 UK residents - 6 April 2020 Obligation to make return: NRCGT: 30 days Corporation tax: tax return AND payment on account Problems: estimates/error due to short time losses

SDLT : Returns and Payments 30 days From 1 March 2019: 14 days

SDLT: higher rates for additional residential properties From 1 April 2016: extra 3% SDLT : Up to £40k: 0% 0 to £125k: 3% £125k to £250k: 5% £250k to £925k: 8% £925k to £1.5m 13% Over £1.5m: 15% Affects domestic and foreign purchasers Companies also (but e.g. >£500k & not rented = 15%)

SDLT: non-residential Freehold commercial property purchase Up to £150k: 0% £150k to £250k: 2% Over £250k: 5% Also SDLT on value of annual rent (1% £5m)

A Trust B B A A Trust B 20% Guarantee 80% BANK Loan due to Bank K Ltd (BVI) OFFSHORE UK C A Security UK UK UK UK UK UK

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Jonathan Colclough New Quadrant Partners Ltd 22 Chancery Lane London WC2A 1LS jonathan.colclough@nqpltd.com Tel: 020 7430 7150 Fax: 020 7160 5280