Corporation Tax

Indirect disposals of interests in UK land by non-residents

Produced by Tolley
  • 03 Dec 2021 11:30

The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Indirect disposals of interests in UK land by non-residents
  • Property richness test
  • Basic rules
  • Qualifying assets
  • Linked transactions
  • Substantial indirect interest
  • Connected persons
  • Level of investment
  • Trading exemption
  • Meaning of qualifying trade
  • More...

Indirect disposals of interests in UK land by non-residents

UK property is often held by non-resident persons indirectly, typically through the holding of shares in a company that in turn directly owns the property. For corporate groups, this form of ownership of UK property is very common, with property holding companies often established in such circumstances. Prior to 6 April 2019, these types of indirect disposals by non-residents were not commonly within the scope of UK corporation tax.

However, from 6 April 2019, disposals of shares (or similar interests) in ‘property rich’ companies are subject to tax. The legislation is drafted with reference to a right or interest in companies that are ‘property rich’, but also includes entities deemed to be companies, such as offshore collective investment vehicles who fall within the definition of company for these purposes. For more on the rules that apply to collective investment vehicles, see Simon’s Taxes C2.1165.

The following two tests must be performed at the date of disposal to establish whether an indirect disposal is chargeable to tax:

  1. is the disposal of a right or interest in a company that is ‘property rich’ (broadly, one where at least 75% of its gross asset value is from interests in UK land)?

  2. does the non-resident person hold a ‘substantial indirect interest’ in the company either at the time of the disposal or at some point in the two years prior to that date (substantial being an interest of 25% or more)?

TCGA 1992, Sch 1A, Part 1,

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