In Philip Hammond’s budget announcement on 22nd November 2017, he announced a measure which has a significant adverse impact on the UK real estate sector. In particular, it limits the future tax benefits of using an offshore structure to invest in UK real estate.
From April 2019, most overseas investors will be taxed in the UK on any gains from selling UK real estate or entities which are ‘rich’ (i.e., at least 75 per cent of their gross asset value) in UK real estate. Those investors will therefore no longer be able to escape UK tax on those gains, even if they invest in the UK real estate through an offshore structure. This applies to both commercial and residential property.
The tax rate will reflect that of UK investors: currently 19 per cent for corporates, and 20 per cent (commercial property) or 28 per cent (residential property) for non-corporates.