Brexit – bad news or good news regarding April property valuations?
If the UK leaves the EU with no deal, the Bank of England and industry commentators are predicting both a drop in the pound and commercial property prices. Assuming this is temporary and prices will in fact recover once our EU exit is fully resolved, for overseas investors with the appropriate appetite for risk, this could present an attractive investment opportunity.
However, non-UK resident investors who already own UK property that is coming within the charge to UK tax for the first time in April 2019 could actually lose out as a result of properties being rebased for tax purposes at April 2019 values. This means that capital gains accruing from this date could be higher than they might otherwise have been had the property market not been adversely affected by Brexit.
Although time is now running out, our advice is to focus on bringing forward any planned property enhancement initiatives to improve April 2019 valuations. Additionally, to reduce the risk of valuation disputes with HMRC at the time of a subsequent property disposal (which could be many years down the line), investors would be well advised to procure ‘real-time’ April 2019 valuations while market conditions and other factors affecting valuations are easily ascertainable and can be documented.
Click here for further details of the tax changes from April 2019 for disposals of UK property by non-UK residents.
Please contact your partner at Kingston Smith or a member of our property team if you would like to discuss your UK property holding structure, how we may assist you with obtaining a property valuation, or to understand the implications of the new tax rules for your property business more generally.