The Budget announced the immediate imposition of a 15% stamp duty land tax (SDLT) charge where a single dwelling costing more than £2m is acquired by certain 'non-natural persons'. In addition, it was announced that there would be consultation on:

  • introducing an annual charge on such properties so held
  • extending the capital gains charge to cover gains arising on such properties where the non-natural person is non-UK resident.

We now know a little more about the Government's proposals for these two new charges, with the publication of a consultative document, Ensuring the fair taxation of residential property transactions. Whether the proposals are 'fair' is a moot point.

With regard to the annual charge, the proposals are as follows.

  • The properties and entities affected will be the same as for the 15% charge.
  • The rates will be as below with the bands to be indexed according to the consumer price index each year:

    Value Charge
    £2m to £5m £15,000
    £5m to £10m £35,000
    £10m to £20m £70,000
    £20m+ £140,000
  • It will take effect from 1 April 2013.
  • The valuation will be self assessed with the value at 1 April 2012 forming the start point for existing structures in the same ownership, with five-yearly revaluations thereafter; a pre-return valuation checking service will be offered.

The capital gains charge will target a wider range of owners as, unlike the 15% and annual charges, it will also apply to trustees, among others. There will be no rebasing as at 6 April 2013 when the charge will commence, hence all accrued gains will be caught. This makes it retroactive in effect, even if not strictly retrospective. It will apply both to direct disposals of relevant UK properties and to the disposal of shares in companies where more than 50% of the value of the company derives from UK residential property.

The advent of these charges will focus minds on whether existing structures should be collapsed. The tax consequences of any such action are likely to be complex and will need careful advice.

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