Britain's Chancellor George Osborne revealed in his Autumn Statement that from April 2015 non-UK resident property owners will have to pay Capital Gains Tax.
While markets await more details, the announcement refers to future gains, which implies that it will only be gains made from April 2015 that will be affected.
The rate of tax has not been specified but it is reasonable to assume that it will be 28%, the rate currently paid by non-UK companies on the sale of residential property for more than £2m (€2.4m, $3.3m). Interestingly there seems to be no threshold for the new proposed charge.
The real question is how HMRC intends to police the payment of this tax.
A UK taxpayer would usually declare a chargeable gain in their tax return which must be filed by the end of January following the end of the previous tax year in April.
The tax is also payable at that point. There can therefore be a gap of as long as 21 months between the transaction date and the date for payment of the tax.
If the same regime applies for non-resident property owners, how will HMRC actually procure payment if that person has by the payment date left the jurisdiction and gone back to their home country without paying the tax due?
Similar problems potentially arise in connection with the letting of property by foreign landlords but that was tackled by the creation of the non-resident landlord scheme. Under that scheme, letting agents are required to withhold tax (unless exemption is obtained) and to account to HMRC on behalf of the landlord.
Will the government, therefore, propose a similar scheme for the CGT payable by non-residents but, if so, that raises a number of difficulties.
First, who will actually hold the tax and at what point will it be remitted to the Revenue? Might it be the selling agent or the seller's solicitor and would they have to hold the money and pay it over once the tax return has been completed or would there be the ability to pay it more quickly?
More importantly, how should the tax be calculated because if the property was acquired before April 2015, there may be uncertainty as to the value of it in April 2015 which, ultimately, will only be determined by the district valuer? Might the person holding funds to meet the liability himself be at risk if the amount he is holding proves to be insufficient to meet the tax liability?
All these questions will hopefully be resolved by the consultation which has been promised early 2014 and before the new tax charge is introduced.
Robert Barham is Senior Partner of solicitors Pemberton Greenish LLP. Based in Chelsea, the firm specialises in London Real Estate and has particular experience in high value conveyancing in the prime central London area.