April 2017 has already passed, and the changes in the tax regime which the government had promised for that date have not yet come into force.
But the government has made it clear that they will come into force, and will be backdated.
What is in question here is Inheritance Tax (IHT). Until the contemplated changes come into force, it was possible for inheritance tax on residential property in the UK to be avoided if ownership was domiciled outside the UK. That could be effected by the fact that the owner actually lived outside the UK (a non-dom), or that the property was vested in a partnership, corporation, or some other legal entity that had its being outside the UK.
Under the changes that we are assured will come into force, that will no longer be the case. Residential property in the UK will be subject to inheritance tax, no matter who the owner may be.
Note that these changes do not include changes to Capital Gains Tax (CGT), because CGT has been payable by non-resident owners of residential property in the UK since 2015.
The purpose of this post is not to say whether levying CGT and IHT on non-doms is, from an overall point of view, a good thing or bad thing – it is simply to say what the situation is.
From the point of view of the individual investor, however, the implications must be negative because they involve assessment for and payment of tax where no tax was previously due.
When it comes into force, the new legislation will have ‘see-through’ provisions enabling HMRC to track beneficial ownership to the person who actually benefits from ownership of the asset, so using offshore companies to hold properties will not reduce the tax bill.
Buy-to-let is a complex business, and the decision on whether – and how – to invest must be made after careful consideration. Investing without taking the right kind of advice would be a mistake, and the possible consequences become more severe with each new development in the market.
If you are thinking of investing in London residential property, contact us. This is our area of expertise and we will be delighted to talk through with you the best way to meet your investment security and profitability aims.
