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Holding investment property
•
Property rental business profits from United Kingdom
land are subject to corporation tax or income tax at rates that
depend on the nature of the property owner: 23% corporation
tax reducing to 21% in April 2014 and 20% in April 2015 for
United Kingdom resident companies; 20% income tax for non-
United Kingdom resident companies; and up to 45% income
tax for individuals.
•
Exemptions from such tax are available to, for example, chari-
ties, pension funds and sovereign wealth funds.
•
Profits are calculated broadly by reference to accounts prepa-
red on generally accepted accounting principles but with some
detailed modifications.
•
Capital allowances (tax depreciation) are available to set off
against such profits in respect of capital expenditure on certain
assets that are used in the property rental business, parti-
cularly plant and machinery at rates of 18% per year on the
reducing balance of expenditure for non-integral features and
8% on such balance for integral features.
•
There is also an annual tax on enveloped dwellings (ATED) that
applies to high value (over £2m) residential properties that
are owned by companies, partnerships including companies
and collective investment schemes at flat scale rates of up
to £140,000 per year for a property worth over £20 million,
though there are a number of reliefs and exemptions available
for property developers, property traders and property inves-
tors who carry on their businesses on a commercial basis and
with unconnected persons.
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Disposals
•
Gains on disposals of properties held as investments attract
corporation tax for United Kingdom resident companies at the
rates mentioned above and capital gains tax (CGT) at the rate
of 28% for United Kingdom resident individuals, but do not
attract United Kingdom tax for non-United Kingdom residents
unless the gains are ATED-related gains made by sellers to
which the ATED applies in which case they attract CGT at the
rate of 28%.
•
Income profits on sales of properties acquired and held as
trading stock or developed and sold in the course of a trade
attract corporation tax at the rates mentioned above for
United Kingdom resident companies and non-United Kingdom
resident companies that trade in the United Kingdom through
a permanent establishment and income tax at rates up to 45%
for individuals.
•
Gains of a capital nature made by persons that acquire (or
develop) land with the sole or main purpose of realising a gain
from disposing of the land or anything deriving its value from
the land (when developed) may be subject to United Kingdom
income tax if their activity is not subject to United Kingdom tax
on trading profits, though non-residents may be able to obtain
relief from such tax under any applicable double tax treaty
with the United Kingdom.
Investor Guide to Europe 2014 | 111
