UK: Taxation Of High Value Residential Real Estate - Help! What Can We Do Now?

Consultation on the paper 'Ensuring the fair taxation of residential property transactions' has now closed and draft legislation is expected 'on or before' 11 December 2012. While the period of consultation is valuable to the drafting of legislation, it has left an extended period of uncertainty for homeowners, unsure how the new rules will apply, and the date of implementation, 6 April 2013, is now just months away.

Homeowners have a broad idea of how the rules will affect them, but with no detail available, advisers cannot say with certainty the extent to which existing structures will be taxed under the new regime, with the greatest area of uncertainty lying in the application of the proposed capital gains tax regime. Equally, advising on an appropriate structure for new purchases is fraught with all structures involving some form of compromise on tax optimisation.

What is clear is that many existing structures holding high-value residential property may bear additional, and often high, costs from 6 April 2013 and major decisions will need to be made and implemented in a very short time-frame.

What can we do now?

Uncertainty need not lead to inactivity. Information can be collated and preparatory steps taken to ensure that when the legislation is published a decision can be made as to whether a structure should be maintained or wound up. Preparation will enable that decision to be implemented swiftly, without unexpected delays and last minute hitches. Without preparation, the condensed time-frame may mean that it is not possible to implement the decision in the time available. Missing the 6 April 2013 deadline could be costly, both in terms of capital gains tax on a disposal triggered by unwinding a structure after that date, and also in terms of the ongoing annual charge to be imposed from 6 April 2013.

If the following information can be gathered, those holding high value residential property, and so potentially within the scope of the new regime, will be in a strong position and will be better able to effect a speedy response to the detail of the legislation.
The following areas should be considered further by anyone owning or managing a structure that is likely to fall within the scope of the rules, whether that be a trustee directly or indirectly holding UK residential property or an individual who owns a residential property holding company:


Establish the base cost of the property (which will include costs of purchase such as stamp duty or SDLT, property agent search fees, capital improvements, etc.) and the market value as at 1 April 2012.

Tax status of shareholders, settlors and beneficiaries

Identify the current tax status of the shareholders of any directly held company and of the settlor and beneficiaries of any trust owning, directly or indirectly, high value residential property.

Future plans

  • What are the future plans for the property? Who will occupy the property? Will the property be rented to third party tenants? When will the property be sold - in the near future or is the intention to retain it in the long term?
  • If possible alternative owners are individuals, what are the ages and states of health of those parties? Are the alternative owners married?

The structure

  • Establish how the structure was funded. For example, where the property is held by a company, how was that company funded? The tax consequences of unwinding the structure may differ depending on the mechanics adopted on the original purchase.
  • Does the structure hold any other assets or investments?
  • Have gains already been realised or income arisen within the property holding structure.
  • Have any benefits been received by beneficiaries of the owning entity, including, in particular, rent-free accommodation? Can the value of those benefits that may have been enjoyed be ascertained?

Company due diligence

Where the property holding structure includes a non-trustee company, check the status of the owning company – are returns up to date and is the company in a position to liquidate at short notice? It is not unknown to find that long-standing corporate owners continue to have bearer shares! It is not always possible to liquidate a company with bearer shares and the registration of shares can be time consuming.


To ensure that a liquidator is available to deal with the liquidation of a company, consider taking steps now to instruct a liquidator. If, as is expected, liquidators will be in great demand, early instruction will ensure that your liquidation will proceed on time.

Up-to-date identification requirement

Up-to-date ID for both the holding structure and any individual or structure that is acquiring property from it will be required by UK professionals and is a requirement of the UK Land Registry. In order to save delays, check that ID held by professionals is up to date and, if not, check as to what information is required by them and the UK Land Registry. Lack of ID will delay a transaction.

UK Land Registry compliant information for liquidation

UK Land Registry compliant information must be provided to prove that a company is in liquidation. The required information for a property holding company in liquidation will include:

  • Certified copies of Court Orders or other documents being relied upon.
  • The written opinion of a lawyer qualified to practice company law in the country of incorporation of the company as to the nature and effect of the process on the company and as to the powers of the liquidator or other persons representing the company, including the power to execute documents on behalf of the company.
  • Certified copy translations will need to be supplied of any documents not in English.

Title deeds

Title deeds to the property and all documents relevant to the property, e.g. landlord's consents, planning permissions, etc., should be located.

Leasehold property – landlord's consent on a liquidation

Where a structure owns leasehold property, the terms of the lease should be checked to establish whether landlord's consent to a disposal of the leasehold interest is required. If it is, steps should be taken to establish what information the landlord will require for the acquiring individual/entity.

  • If the property is acquired by an individual:
    • Will personal/professional/banking references be required, and if so, is the acquiring individual able to provide a UK bank reference?
  • If the acquiring individual is non-UK resident, will they be required to provide:
    • a UK guarantor; or
    • a rent/service charge deposit (often totalling two/three years outgoings on the property)?
  • If the property is being acquired by some other entity, will the landlord require:
    • a UK guarantor; or
    • a rent/service charge deposit (often totalling two/three years outgoings on the property)?
  • Will the landlord require for the acquiring entity:
    • a rent deposit;
    • a deed of covenant.
  • In order to ensure that the landlord deals with an application quickly, you should be prepared to pay the landlord's costs to deal with your request for licence to assign. The level of these costs should be established and your UK solicitor put in funds so that they may give a cost undertaking immediately once a decision to transfer a property has been taken.
  • As with liquidators, landlords and their solicitors and lenders are likely to be very busy if many structures choose to liquidate and early instructions will help to ensure that your application is dealt with.
  • Does the owning entity have a share in a management company? If so, the share certificate should be found and the procedure for transferring ownership to the acquiring individual/entity established.


  • If there is borrowing in the current structure, how will this be redeemed?
  • Details of any current lender, relevant account numbers and the method by which the existing security will be discharged should be established and these details supplied to your UK solicitor.
  • If new borrowing will be put in place, has a lender agreed to take security over assets other than the property? If so, what due diligence in relation to these assets will the lender require and how quickly can the lender's requirements be met?
  • If it is suggested that, following liquidation, a charge will be given over the property, what due diligence requirements will the lender have and how quickly can they be satisfied?

Non-UK law advice

In many cases, you will need to consider whether non-UK law advice is required, and the earlier that such advice is requested/obtained the more certain the timing will be met.


It may seem obvious, but, where there is time pressure in a transaction, check that all parties that are required to sign documents are available at the relevant times and make sure that Powers of Attorney in forms that are acceptable to the UK Land Registry are executed if required.

Continued corporate ownership

In some cases, it may be decided that the benefits of continued corporate ownership outweigh the downsides of the new regime. If that is the case, it may be appropriate to consider taking steps to achieve a rebasing of the property to current market value so as to minimise the impact of the new rules on a future sale.

Act now

These steps are simple and for the most part self-explanatory. However, delaying investigation of questions such as the need for landlord's consent to a transfer, for example, could make the difference between being able to unwind a structure before 5 April and staying out of the new regime and being wedded to an undesirable structure with no hope of a tax efficient exit.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Christopher Groves
In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions