In 2012, the government declared war on 'non natural
persons' buying high-value properties. "Zombies" as
we have come to know them are, to all intents and purposes,
Contrary to popular belief, banging them on the head is not the
appropriate way to destroy "Zombies". The answer instead
lies in new property taxes. In April 2012 the government introduced
new Stamp Duty Land Tax (SDLT) thresholds of 7% for individuals and
15% for "Zombies" buying residential property worth more
than £2 million. The government also announced proposals for
a new Annual Tax and the introduction of Capital Gains Tax, both of
which were subject to a consultation period which has now ended.
The draft "Zombie" killing legislation is anticipated in
The UK government was concerned that "Zombies" were
being used to buy up high value residential property in the UK.
Wealthy people were then selling their "Zombie" on to
someone else, thereby avoiding SDLT. In practice, this was not
commonplace. The main drivers for holding property using a
"Zombie", were to give non-UK residents privacy and also
comfort, that following their death, their heirs would not face a
significant (40%) Inheritance Tax bill - turning the traditional
image of a "Zombie" being a bad thing on its head.
The proposed Annual Tax will depend on the value of the
property, will range from £15,000 for properties worth over
£2 million to £140,000 for properties worth over
£20 million. This sum is of course paid every year and is in
addition to the higher rate of SDLT payable by
Capital Gains Tax (CGT) will be payable on the sale of property
by "Zombies" and will apply (at an as yet undisclosed
rate) on all gains from the property and not just gains that have
arisen since the introduction of the tax.
The effect of the consultation has been immediate. Land Registry
figures, published on 27 July 2012 reveal that there has been a 43%
reduction in the number of sales involving properties worth over
£1 million down from 825 in April 2011 to just 468 in April
If you or your clients already own high value residential
property using a "Zombie" it is vital that you review
each structure, to determine whether it remains appropriate. The
key is to be prepared, so you can take early decisions on whether
restructuring is necessary.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Maltese tax law provides for rules which grant beneficiaries referred to as ‘Highly Qualified Persons' to be taxed at a reduced rate of tax of 15% on their employment income, provided certain conditions are satisfied.
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