The introduction of a form of 'mansions tax' was well
trailed. The stamp duty land tax (SDLT) rate for purchase of
residential property with a value of more than £2m has
increased from 5% to 7% and we now have the consultation on the
proposed annual SDLT charge for high value residential dwellings
owned by non-natural persons, which is explained in the next
In order to escape paying SDLT at a rate of 15% on the purchase
of single dwellings with a value in excess of £2m it is
necessary for the residential property to be held personally or
through a partnership structure (although if the partnership
includes a company partner, then the 15% rate will apply). Our
experience is that most non-UK resident and non-UK domiciled
individuals choose to hold residential property through an offshore
structure to avoid a charge to UK inheritance tax (IHT) on their
death. The rate of UK IHT can be up to 40% and while most
non-residents accept the payment of death duties in their country
of residence and domicile, it is a high penalty to pay for a UK
In addition to the 15% SDLT charge, the UK Government is to
consult on an annual SDLT charge for residential property held by
certain 'non-natural' persons and the extension of CGT for
residential properties to such persons who are non-UK resident.
This is expected to be introduced from April 2013.
It should be noted that there are several practical issues
arising from the SDLT changes and the further proposed changes are
Where individuals/trustees are intending to acquire a
residential property in the UK with a value in excess of £2m,
early consideration needs to be given to the most appropriate
For existing structures, clients should be made aware of the
proposed annual charges and capital gains tax changes.The changes
could have a significant impact on expected UK tax costs going
forward. It is recommended that individuals/trustees should now
start to consider what is the most tax efficient structure to hold
residential property from April 2013.The most appropriate structure
will depend on the exact circumstances of each client including
their current and prospective residence and domicile status.
It is recognised that many wealthy clients prefer anonymity and
this will be an important factor in any considerations.
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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