Posted by Kate Boyes BSc (Hons) FARLA MRICS on Wed, 2012-03-28 14:39
- 7 per cent stamp duty rate introduced on homes worth £2 million plus from March 22 2012
- 15 per cent stamp duty rate on £2 million plus properties purchased by companies from March 21 2012
- Capital Gains Tax on the sale of property owned by offshore companies
- Consultation on annual property tax for homes worth more than £2 million owned by companies
- Surprise introduction of standard-rate VAT on alterations to listed buildings
An increase in the taxation of high-value property has been flagged for some time so something from the Chancellor in last Wednesday’s Budget was no surprise, although he cast the net wider than expected.
The announcement of a higher 7 per cent rate of stamp duty (an extra £40,000 on a £2 million home) from March 22 will affect around 3,000 property sales a year. Buyers who exchanged contracts (as long as the contracts are unconditional and unaltered) before March 22 but do not complete until after, are not liable for the new rate and pay the old rate of 5 per cent.
The introduction of the 15 per cent charge for acquisitions over £2 million by “non-natural persons” - companies, partnerships and collective investment schemes - was effective from March 21, although transactions where contracts were exchanged before this date are also exempt. It is understood that the levy will apply to both UK and non-UK companies, unless they are property developers or a company acting in its capacity as a trustee for a settlement.
Tax experts anticipate that the introduction of these higher rates will result in more avoidance schemes. However the Chancellor stated he would deal with avoidance schemes immediately and retrospectively as part of the General Anti-Avoidance Rule (GAAR). Until the GAAR is released, a great deal of uncertainty will cloud tax planning for individuals and companies planning transactions.
The Chancellor also proposed that from April 2013, the sale of property held by non-UK companies or shares in non-UK property holding companies will be subject to Capital Gains Tax (CGT). This change applies to properties of any value, not just those over £2 million.
The Government also intends to consult on the introduction of an annual tax on residential properties valued at over £2 million that are owned by companies in April 2013. This proposal is the closest the Government came to announcing a “Mansion Tax” in the Budget.
Taken together, these measures give owners of property held in companies an incentive to transfer the assets into their own name before next April.
The change of VAT treatment on alterations to listed buildings from 0 per cent to 20 per cent will potentially add a huge additional cost burden to such alterations. “The sudden jump from zero will almost certainly have a detrimental effect on the number of projects that are undertaken,” says the Royal Institution of British Architects.