As announced in the Autumn Statement 2016, non-UK resident companies carrying on UK property business (or who have other UK property income) will be bought within the charge corporation tax, rather than income tax, on their rental profits. This change will apply from 6 April 2020.

The revised draft legislation, published today, provides more detail on how the loan relationship and derivative contract rules will apply. A new targeted anti-avoidance rule will also apply to counteract any arrangements where the main purpose is to secure a tax advantage related to the introduction of these provisions. Guidance is to be introduced during 2019 to assist non-UK resident companies to implement these changes.


Given the complexity of bringing non-UK resident companies into the corporation tax regime, the early release of guidance will be important to allow businesses to plan for the transition.


Following a consultation released at Autumn Budget 2017, the government will legislate to bring gains made by non-UK residents on disposals of UK immovable property within the charge to tax. This applies to disposals taking place on or after 6 April 2019.

This will extend existing rules which apply to the disposal of residential property by certain investors. Further draft legislation is published today covering how the new rules will apply to collective investment vehicles.


Release of the draft legislation, with only 5 months until it comes into force, will mean there is little time for consultation and amendment. FTI will be lobbying to ensure that collective investment vehicles are not disadvantaged by the proposed changes.


Following consultation, legislation will be introduced requiring UK residents to make a payment on account of capital gains tax following the completion of a residential property disposal.

A return will need to be delivered to HMRC within a ‘payment window’ of 30 days following the completion of the disposal, and a payment on account will need to be made at the same time.

This replaces and extends the rules for disposals by non-UK residents on or after 6 April 2019. For UK residents the changes will have effect for disposals on or after 6 April 2020. Disposals by non-UK resident companies (to be instead within the scope of corporation tax on chargeable gains) and by UK residents of non-UK properties are not within the scope of these rules.


The risk of tax loss to the Government needs to be weighed against the compliance burden on taxpayers. As calculating the chargeable gain may need to take account of costs of disposal, the 30 day period to file and pay may prove unduly short in many cases.


SDLT – Consultation on charge for non-residents

The government will publish a consultation in January 2019 on a SDLT surcharge of 1% for non-residents buying residential property within the scope of SDLT (that is to say in England and Northern Ireland). No details have yet been given as to how this might fit with the existing complex rules for SDLT on dwellings.


Given the 3% additional SDLT charge on the acquisition of second homes, there is a question as to whether this is necessary or unduly adding complexity to an already multi-layered tax charge. 

SD, SDRT – Stamp Taxes on Shares Consideration Rules

Until now, stamp taxes on shares have been based on actual consideration paid rather than on market value. The government has introduced a targeted market value rule for Stamp Duty and Stamp Duty Reserve Tax (SDRT) for listed securities transferred to connected companies. “Connected” will take its normal tax meaning – essentially companies under common control.  The new rule comes into effect from Budget Day and the basic legislation has been published. A consultation will be published on 7 November.

The Government asserts that this will simplify stamp taxes on shares and prevent contrived arrangements being used to avoid tax, though its estimates of additional revenues from the measure are “negligible” which implies that it has not detected any extensive use of schemes which are to be blocked.


Unless a comprehensive set of reliefs are introduced for reorganisation transactions, this measure could result in substantial charges in innocent situations.

First-Time Buyers’ Relief and Shared Ownership

Relief for first-time buyers will be extended to purchases of qualifying shared ownership property where the purchaser chooses to pay SDLT in stages. This aligns the relief, which is already available to those making a market value election, for first time buyers in respect of the first share purchased, and also to the rental payments irrespective of which election was made. The changes will apply retrospectively from 22 November 2017 and over-payments of tax relative to the new regime can be reclaimed.

SDLT – Changes to the filing and payment window from 30 days to 14 days 

The legislation will now be put into place to implement this Budget 2017 announcement. It will take effect from 1 March 2019 and there will be some minor improvements to the SDLT return in order to facilitate implementation.


The risk of the loss of tax to the Government needs to be weighed against the compliance burden on taxpayers. Improvements to the SDLT return, to simplify the filing process, will be welcomed.

ATED – Annual Chargeable Amounts for the 2019 to 2020 chargeable period

The Annual Tax on Enveloped Dwellings (ATED) charges will rise by about 2.4% in line with inflation for the 2019-20 chargeable period, beginning 1 April 2019.


Structures and Buildings Allowances

A decade on from the announcement of the withdrawal of industrial and hotel building allowances, the Chancellor announced the introduction of a new Structures and Buildings Allowance (“SBA”) for new non-residential structures and buildings.

Business and real estate groups have long lobbied for closure of this gap in the UK capital allowances system and was one of the issues highlighted in the recent OTS review of accounting depreciation and capital allowances.

Broadly, businesses that incur capital expenditure on or after 29 October 2018, on new commercial structures or buildings (including conversions and renovations) used for qualifying activities will be able to claim a deduction at an annual rate of 2% on a straight-line basis over fifty years. There is to be no balancing charge or allowance on disposal but instead the annual allowance entitlement then automatically transfers to the buyer.

However, on a disposal, the base cost of the asset will be reduced by the amount of SBA claimed by an investor during its ownership, meaning that the allowance may only present a temporary benefit.

The technical note published by HMRC suggests there will be a definition of dwelling for the purposes of SBA and a consultation before it is set out in legislation. The absence of a definition of dwelling of general application in CAA 2001, for plant and machinery allowances for example, has caused problems in the past so it will be interesting to see the new statutory definition and whether its scope will be limited purely to SBA.


The introduction of an allowance for the cost on previously non-qualifying construction costs is welcomed and brings the UK into line with many other jurisdictions.

Reduction of special rate writing down allowance

In what appears to be a quid pro quo for the introduction of SBA, there will be a reduction in the special rate of writing down allowance applicable to assets such as integral features (mainly building services) and long-life assets (typically plant and machinery in big infrastructure and utility projects), from 8% to 6% from April 2019.

Treasury forecasts estimate that over the period from 2018/19 to 2023/24 this change will have a £1,000m positive impact on tax revenues, partially offsetting the £1,905m cost of the introduction of SBA.

Temporary Increase in the Annual Investment Allowance

The AIA for investment in plant and machinery will be temporarily increased from £200,000 to £1m from 1 January 2019 to 31 December 2020.

An increase in AIA was not wholly unexpected as it was another item that was recommended for further consideration in the OTS report reference above; but a limit of £500,000 was perhaps thought more likely than £1m.

The measure is trailed as an investment stimulus by incentivising business to accelerate their investment plans to take advantage of the additional deduction available for expenditure on plant and machinery in the year it is incurred.

Treasury estimates the cost in 2018/19 to 2020/21 at £1,240m.

Where a business has a chargeable period that spans the introduction of the increase on 1 January 2019 and the end of the increase on 31 December 2020 similar transition rules will apply as applied to previous changes in the amount of AIA.

Further rules will apply to group companies or businesses under common control, which share a single AIA.


Whilst welcomed, the question is whether this will be enough of an incentive for businesses to be persuaded to accelerate their investment plans in a 2-year pre and post Brexit window frame.

Ending Enhanced Allowances for Energy and Water Efficient Plant and Machinery

The ECA scheme was introduced in 2001 and has long attracted criticism for the practical difficulties of establishing whether expenditure on an asset qualified for 100% first year allowance or the associated first year tax credit.

The OTS recommended that the scheme be withdrawn several years ago as one of numerous suggestions to simplify the tax system, but the recommendation was not acted upon for fear of undermining the government’s green credentials.

It has now finally been decided to abolish the scheme from April 2020 and use the money to fund the Industrial Energy Transformation Fund.

For further information please contact Linda Bertolissio or Riina Rintanen.