UK commercial property warning as tax changes bite

UK commercial property warning as tax changes bite

Demand for UK commercial property continues to be driven by overseas investors, but looming changes to the tax treatment of those investments mean the outlook is uncertain, a trust manager has warned.

In November’s Budget, the chancellor announced overseas investors in UK commercial property would no longer be allowed to claim capital gains tax relief on those investments.

Pension funds will remain eligible for the tax break, but not other institutional investors or private individuals.

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According to Vikram Lall, chairman of the £360m F&C UK Real Estate Investment trust, the performance of commercial property assets “has been buoyed by investment, especially from overseas".

"But the impact of proposed new tax regulations on foreign buyers in 2019, if implemented, is unclear.”

He added: “Although there were some signs of progress in the EU negotiations as the period drew to a close, the outlook continues to be dominated by Brexit considerations and wider political uncertainty. Interest rates were raised during this reporting period and the timing and magnitude of further increases is also likely to be a consideration for property investors moving forward.”

The F&C UK Real Estate investment trust has struggled for performance over the past year to 26 February, returning 6 per cent, compared with 8 per cent for the average trust in the AIC Property Direct sector in the same time period.

The dividend yield is 4.8 per cent.