The measure taxes gains made by non-UK residents disposing of UK immoveable property, whether the disposal is made directly, or indirectly via a property-rich company or ‘envelope’.  This includes gains on disposals of interest in commercial properties held directly or held indirectly, by interests in property-rich entities.

It will also apply to residential property held directly and indirectly by widely held companies, which is not currently in scope of corporation tax and CGT. Existing exemptions from capital gains for non-residents would apply.

This measure will be effective on gains accruing after April 2019.

Treasury costings suggest tax yields will be modest in the first three years of the legislation being brought in, with additional receipts of £5m, £15m and £35m. However, by 2020/21 the government is expecting an additional £115m rising to £160m by 2022/23.

Russell Gardner, head of real estate at EY, said: ‘A fundamental change to the taxation of UK property owned by non-residents was wholly absent from the Chancellor’s speech, but is to be consulted on with a clear intent to be introduced in April 2019. This is a seismic change to the UK property landscape despite the modest expectations of additional revenue set out in the Red Book.

‘At a moment in time where the UK wants to attract more international capital for real estate and infrastructure investment this will send a chill through the investor community.’