Property – trading or capital gain

HMRC have introduced a new tax rule to take effect for property disposals made on and after 5 July 2016 by overseas investors to cause them to pay UK tax. But this might catch some UK landlords as it is widely drawn. Profits from UK property sales made on or after 5 July 2016 will be taxed as part of a trade of dealing or developing land, where any of the following conditions apply:-

• The main purpose or one of the main purposes in acquiring the land was to realise a profit or gain from its disposal
• The main purpose or one of the main purposes in acquiring the property was to realise a profit or gain from the disposal of the land
• The land is held as trading stock
• The main purpose or one of the main purposes of developing the land (where this is done) was to realise a profit or gain from disposing of the land when developed

We can see that this could rise to a lot of disputes with HMRC, for example where a landlord acquires a property to let but have an eye on gains that could be made.

The new law does not apply to homes which are exempt from CGT as the main residence exemption applies.