UK: Asia UK Autumn Statement 2014

Last Updated: 8 December 2014
Article by Katie Graves and Philip Munro

In his Autumn Statement delivered on 3 December, the UK Chancellor announced several measures that will directly affect non-UK individuals who live or own property in or are considering moving to the UK. Although in many cases the measures will mean that such individuals are liable to pay more tax in the UK than previously (whether on one-off transactions or on an ongoing basis) the UK remains an attractive place for individuals to settle with a tax regime that has many advantages.

Many of the changes focus on residential property which has now been targeted for increased tax by all of the political parties in the UK.

High value residential property - increased purchase costs

The Autumn Statement introduced a significant change to the Stamp Duty Land Tax ('SDLT') system for residential property. These changes came into effect at midnight on 3 December. SDLT is now payable at new rates on the portion of the purchase price falling within new set bands. This is a significant change to the old system, under which a single rate of purchase tax applied to the entire purchase price.

The effect of these changes is that high value properties will be subject to significantly higher total SDLT charges. In brief, a 0% rate will apply up to £125,000. From £125,001 – £250,000 a 2% rate applies, and from £250,001 – £925,000 a 5% rate applies. A 10% rate applies from £925,001 – £1.5m and a 12% rate over £1.5m.

The bands have been designed to ensure that properties purchased for £937,500 or less will not be affected. However, an individual purchasing a property for more than £937,500 will have to pay considerably more SDLT than before and the greater the purchase price, the greater the overall effect. For example, a £5m property will now carry a £513,750 SDLT charge (where previously the charge would have been £350,000) and a £10m property will now carry a £1,113,750 SDLT charge (where previously the charge would have been £700,000).

The flat 15% charge will continue to apply to properties worth over £500,000 bought by non-UK resident companies.

Extra ATED charge

In addition to the new SDLT charges, the Annual Tax on Enveloped Dwellings ('ATED') is to increase significantly. From 1 April next year the ATED charge for a residential property owned by a company or other 'enveloped' structure will be subject to ATED at £23,350 for properties worth £2 – £5m (previously this charge was £15,400), £54,450 for those worth £5 – £10m (previously £35,900) and £109,050 for those worth more than £10m but less than £20m (previously £71,850). Properties above £20m caught by ATED will pay tax at £218,200 (whereas prior to the increase this would have been £143,750). It should also be noted that from 1 April 2015 properties worth £1m – £2m will also be subject to the regime with an annual charge of £7,000 being payable.

As a result of these increased charges, purchasers of high value properties which are already held in a company will need to consider whether to bear the ongoing ATED charge or pay significant SDLT costs. In addition, the increased charges will cause individuals who already own UK residential property through a company and have decided to pay the ATED (in order, for example, to secure the inheritance tax benefits of owning property through an offshore company) to reconsider whether it is worth continuing to pay in the future.

And CGT too...

In addition to the increased rates of SDLT and the increased ATED charges, the UK government confirmed last week that non-resident owners of UK residential property will be subject to CGT at (generally) 28% on any gains realised on residential property after April 2015. CGT payable will be limited to gains arising after 5 April 2015 so there will be an effective rebasing of the value of the property as at that date. As an alternative, individuals may elect to time apportion the whole gain over the period of ownership.

Remittance basis – new charges

One piece of good news is that the UK government remains committed to the remittance basis. However, the annual charge for those who elect to be taxed on the remittance basis is set to increase for those who have been resident for at least 12 out of 14 years from £50,000 to £60,000. In addition, a new level of charge will be introduced for those who have been resident for 17 out of the last 20 years (the deemed domicile threshold for inheritance tax) which will be set at £90,000. There is no change to the £30,000 charge for those who have been resident for 7 out of the previous 9 years, and no charge at all is payable by those who have been resident for less than 7 years.

It is to be remembered that at present these charges can be opted in and out of on a year by year basis, so that a taxpayer can opt to be taxed on the remittance basis in a year when the tax on offshore income and gains would be more than the charge but to be taxed on the arising basis in other years. However, this may be set to change with the announcement that there will be a consultation on making any decision to pay the remittance basis charge apply for a minimum of three years.

Anti-avoidance

The UK government also introduced various anti-avoidance measures. Although these will not affect many of our clients, these measures are briefly summarised below.

Google tax

The so-called 'Google Tax' will generate many headlines. This is the introduction of a new Diverted Profits Tax of 25% with effect from 1 April 2015 which will apply to multinational companies who seek to use artificial arrangements to divert profits overseas so as to avoid UK tax.

Offshore evaders

Individuals who evade tax offshore are being targeted further with enhanced civil penalties for offshore tax evasion being introduced with effect from April 2016. There will also be a new penalty of up to a further 50% for moving hidden funds to other jurisdictions to circumvent international tax transparency agreements.

Rewards for whistleblowers

Anyone who provides HMRC with information on offshore tax evaders will receive 'enhanced' financial incentives for doing so. At present HMRC has the power to reward individuals who provide information on tax evaders. The sums rewarded typically range from £50 to thousands of pounds depending on how much additional tax is collected as a result of the information provided. These measures are similar to those in place in the US and other European jurisdictions.

Conclusions

Despite the increased cost of electing to be taxed on the remittance basis and the increasing complexities surrounding property ownership, for many wealthy individuals who are non-UK domiciliaries, the UK tax system remains attractive.

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 Mondaq.com.

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

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.