April 2020 Property Tax Changes

This is a summary of the most important property tax changes that came into effect in April, together with a reminder of some other key recent changes. Clearly the Covid-19 crisis is severely impacting the property market, as it is almost all sectors and areas of the economy, and we will provide other bulletins which are focused on Covid-19 and related challenges and opportunities from a tax perspective shortly.

The main things to be aware of in terms of changes in April 2020 are:

• Tightening of principal private residence relief (PPR) from CGT on residential property sales from 6 April 2020. The final 18 month “grace” period that qualified for PPR provided the property was used as the main residence at some point during ownership has been reduced to 9 months, and “letting relief” where the property is let will only be available for any period when the property is let and the owner continues to occupy part of the property as his main residence (i.e. limiting this relief to lettings of part only).

• Capital allowances and structures and buildings allowances (SBAs):

  1. Enhanced capital allowances for energy-saving and environmentally beneficial plant and machinery (and related payable tax credits for losses arising from the same) will no longer be available for expenditure on or after 1 April 2020.
  2. 100% first year capital allowances on expenditure on plant and machinery in designated enterprise zones, which were due to end on 31 March 2020, have been extended to 31 March 2021.
  3. For companies (from 1 April) and individuals (from 6 April) the rate of SBAs increases from 2% to 3%. This will apply not only to new expenditure from April but also for existing qualifying buildings and structures brought into use after SBAs came into effect (29 October 2018).

• Non-UK resident corporate landlords with a UK property rental business moved from the income tax regime to the corporation tax regime from 6 April 2020. This actually reduces the rate of tax from the basic rate of income tax (20%) to the CT rate (19%) but also means landlords will be subject to the same restrictions that apply to other corporation tax payers, for example around interest deductions and the use of losses.

• UK resident individuals (and trustees) selling UK residential properties where there is a capital gains tax liability (i.e. where PPR is not available) will have to file CGT returns and make a payment on account of the CGT, both due within 30 days after the sale. This applies to sales on or after 6 April 2020, and represents a very significant shift in the compliance process as previously the sale would not have had to be reported in a return nor the tax paid until 31 January following the end of the tax year. People ought to be aware of the new deadlines so as to ensure they pay the tax and file appropriate returns.

Finally, whilst not an April 2020 change, it is very important to remember that all non-UK residents (whether corporates or otherwise) are now within the scope of UK tax on gains relating to UK real estate, both residential and commercial, and this now includes sales of “UK property rich” assets too, such as the shares in a UK property SPV. Broadly speaking, the rules only apply to gains accruing from April 2015 (residential property) or April 2019 (commercial property / property rich assets) so the potential impact of the Covid-19 crisis on current property valuations may actually present some opportunities in this regard, which we will cover in future summaries.

Posted on 27/05/2020 in Tax News, Property Tax News


About us

Parisi Tax is a specialist tax law firm. Our clients benefit from having on-demand access to a wealth of tax knowledge and deal expertise.