HM Treasury has announced a consultation on an annual SDLT charge on high value residential property (applying from 1 April 2013) and the application of capital gains tax (CGT) to gains on such property by certain non-natural persons (for gains made on or after 6 April 2013). Both charges will only apply to residential dwellings with a value of more than £2m. They will not apply to non-residential or commercial property nor to any property held directly by a non-resident individual.

The annual charge would apply to corporate owners, and partnerships with a corporate member, whether UK resident or not. The charge will not apply to ownership by property developers or charities.

The charge will be based on the property value assessed at five-yearly intervals from 1 April 2013. Where the property interest was already in existence on 1 April 2012 it will be the value at that date which is used. This earlier valuation date for existing owners has been chosen so that valuations can be undertaken before the charge applies.

Valuations will be subject to checking by the Valuation Office Agency (VOA). The use of a professional valuation will reduce the chance of the need for the VOA to make an internal inspection of the property, and the VOA will offer a pre-return valuation checking service to property owners.

The charge will be as noted in the following table and the rates will be indexed in April each year (commencing 1 April 2014) in line with CPI in September of the previous year.

Property value

£2m - £5m

£5m - £10m

£10m - £20m

Greater than £20m

Annual charge

£15,000

£35,000

£70,000

£140,000

The due date for payment of the charge will be 15 days after the commencement of the period of account. For existing owners this will be by 15 April each year, though for the first year of operation the later of 1 October 2013 or 30 days after Royal Assent of Finance Bill 2013.

The proposed CGT charge on disposal would apply to non-residents owning high value residential property and for this purpose will include trustees, collective investment schemes and personal representatives as well as companies and other bodies corporate. Partnerships will be treated as transparent, so that any non-resident non-natural member of a partnership disposing of a property within the charge would be apportioned their share of the gain.

The charge will apply to the disposal or part disposal of relevant UK residential property and it will also apply to gains accruing on a disposal, whatever the form of disposal. Thus it is proposed that the charge would apply to the disposal of shares or interests in securities in a property owning company where more than 50% of the value of assets is derived from UK residential property.

The charge will apply to the total gain accruing in the period of ownership, not just the gain from April 2013. Non-UK resident companies currently liable to corporation tax on gains from disposal of UK residential property will be charged at corporation tax rates. Those not within the charge to UK corporation tax on such gains will be within the charge to CGT, according to rates in force at the relevant time.

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