Business

UK capital gains tax on land sale explained

Keren Bobker discusses the planned changes on the UK capital gains tax.

Keren Bobker

March 29, 2014

About 20 years ago, I inherited a piece of land equally with my sister. She lives in the UK and I have been living abroad since 1982. We intend to sell the land. Can you inform me as to whether the new CGT (Capital Gains Tax) applies to the sale of land and, if so, how would the CGT due be calculated. MN Abu Dhabi

Under the current rules pertaining to UK capital gains tax, MN would not be liable to pay tax on any gains since he took half-ownership of the land, assuming he has been deemed UK non-resident for tax purposes for more than five full tax years. Following an announcement in the autumn statement in December 2013, this is set to change but the exact details are not yet known as the legislation is in a consultation period and we are awaiting the outcome. Any changes are due to take effect from April 6, 2015, but it is likely to be at least the end of this year before final rules are confirmed. It is not expected that the changes will be backdated, but the big question is whether there will be a “rebasing” of the base cost to April 5, 2015 values. Many commentators are confident this will be the case, on the basis that it would be unfair to retrospectively tax foreign owners of UK property. There has been no mention of how land will be affected, but this may depend on the status, as farmland has often been treated differently to land with planning permission for residential use. As mentioned, there was little detail in the autumn statement, which stated: “The government will introduce CGT on future gains made by non-residents disposing of UK residential property from April 2015”. As the proposals are really designed to catch non-resident property owners, it may be that land is exempt from these rules and that the existing regulations will apply, but final confirmation will not be available until this change passes into legislation.

Keren Bobker is an independent financial adviser with Holborn Assets in Dubai. Contact her at keren@holbornassets.com

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Coffee: black death or elixir of life?

It is among the greatest health debates of our time; splashed across newspapers with contradicting headlines - is coffee good for you or not?

Depending on what you read, it is either a cancer-causing, sleep-depriving, stomach ulcer-inducing black death or the secret to long life, cutting the chance of stroke, diabetes and cancer.

The latest research - a study of 8,412 people across the UK who each underwent an MRI heart scan - is intended to put to bed (caffeine allowing) conflicting reports of the pros and cons of consumption.

The study, funded by the British Heart Foundation, contradicted previous findings that it stiffens arteries, putting pressure on the heart and increasing the likelihood of a heart attack or stroke, leading to warnings to cut down.

Numerous studies have recognised the benefits of coffee in cutting oral and esophageal cancer, the risk of a stroke and cirrhosis of the liver. 

The benefits are often linked to biologically active compounds including caffeine, flavonoids, lignans, and other polyphenols, which benefit the body. These and othetr coffee compounds regulate genes involved in DNA repair, have anti-inflammatory properties and are associated with lower risk of insulin resistance, which is linked to type-2 diabetes.

But as doctors warn, too much of anything is inadvisable. The British Heart Foundation found the heaviest coffee drinkers in the study were most likely to be men who smoked and drank alcohol regularly.

Excessive amounts of coffee also unsettle the stomach causing or contributing to stomach ulcers. It also stains the teeth over time, hampers absorption of minerals and vitamins like zinc and iron.

It also raises blood pressure, which is largely problematic for people with existing conditions.

So the heaviest drinkers of the black stuff - some in the study had up to 25 cups per day - may want to rein it in.

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

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“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

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