Tax

New UK Capital Gains Tax regime ‘unsettles’ investors

A new report commissioned by Intertrust has revealed that nearly two thirds (61%) of real estate investors are concerned by the impact of changes to UK Capital Gains Tax (CGT).

The new changes, which are set to be introduced in April 2019, will see non-resident investors pay Capital Gains Tax (CGT) on disposals of all types of UK real estate, extending rules that presently apply to residential property only. The intention of the rule changes is to create a level playing field for UK and non-UK based investors, with a single regime for disposals of commercial and residential real estate.

However, the proposed changes have ignited a wave of uncertainty among investors, with the survey finding that 32% will have to alter their structures while 57% put the amount of transaction costs they will suffer for restructuring their interests as their major concern.

Some 13% of property investors are ‘extremely concerned’ about the impact of the changes, with many investors saying they will seek expert external advice given the complexity of the situation at play. In fact, 22% have either already consulted, or are planning to consult, with advisers on how to properly manage the change.

“With the new CGT regime presenting a fundamental shift in the international property investment landscape, we’re seeing an increasing number of clients turn to us to discuss what exactly the changes mean for them and their investments,” Jon Barratt, head of real estate at Intertrust, commented.

He added: “With 40% of investors having maintained or increased their allocations to UK property over the last 12 months, the UK has continued to be one of the most popular destinations for overseas capital. Whether the UK retains its appeal over the next year remains to be seen. This change to CGT is just one more area of uncertainty in a market already exposed to the unknown outcomes of Brexit.”

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