The new UK tax year began on 6 April 2020. As we start it, the UK and global landscape looks very different to the beginning of the previous tax year due to the COVID-19 pandemic. Life will and does go on. This is a good opportunity to take time to consider tax and succession planning.
We have outlined a few things that international investors to the UK should be considering at this time.
Structuring purchases correctly
International individuals may now be thinking of investing in the UK given the reduced value of UK assets, including property. It is still important to consider the best way to structure the purchase to ensure tax efficiency and succession planning perspective. Without forward thought, it can be difficult and expensive to change at a later date.
Restructuring and capital gains tax mitigation
Where UK property is already owned, the economic impact on the value means that this is a good time to think about restructuring. The reduced value may mean less or no capital gains tax (and perhaps even losses) making de-enveloping or transfers much more attractive now.
Compliance
Remember that Annual Tax on Enveloped Dwellings payment needs to be made by the end of April. Even if there is no ATED due (because it is being let out for example) a nil return needs to be made.
Succession planning
It is recommended to have an English law Will to cover your UK assets. Without this, there is often additional cost, time and uncertainty on how assets pass to beneficiaries.
UK tax residence and concessions due to COVID-19
International individuals may be stuck in the UK due to self-quarantining and travel restrictions. The extra time may mean they become UK tax resident and subject to tax on the worldwide income and gains. Days spent in the UK will not count for the purposes of the statutory residence test (“SRT”) in ‘exceptional circumstances’.
HM Revenue & Customs have released guidance noting that the pandemic may impact people’s ability to move freely. It will therefore consider disregarding days spent in the UK, under the ‘exceptional circumstances’ rule.
Investing in UK property through funds
Where property (residential and commercial) investment is to be made through funds, care needs to be taken to ensure capital gains tax is not charged at the fund and investor level, following changes last year.
Changes for the new tax year
From the new tax year, CGT return will need to be made and the tax paid within 30 days of completion.
There is a relief from CGT where a property was someone’s main residence. Where it stops being a person’s main residence, the last 9 months of ownership are also treated as qualifying for principle private residence. This has been reduced from 18 months.
If you require advice on this topic, please contact Hilesh Chavda.