This year’s budget has been marked by several matters of note. Especially if you are a granny, according to many of today’s newspapers.
In our office, it has been marked by various members of the tax team (okay, just me) wandering around with a puzzled expression repeatedly exclaiming either “7%” or “15%”.
So it’s good news for those with £150,000 incomes and companies. But it’s bad news for the property purchasers, developers and estate agents with an interest in the top end of the property market.
HMRC think that only 3,000 £2m plus homes are sold every year and so they would argue that the changes only affect the very elite. Who can, of course, afford the extra 2%…at least that’s what HMRC would say.
In truth these changes are a mansion tax in disguise. On that note, mansion tax has not been ruled out and is being considered for the future.
Come in and chat….
If these changes will affect you, we’d be happy to discuss whether there are any opportunities for planning to reduce the impact.
Stamp Duty Land Tax – Rate in Respect of Residential Property where Consideration over £2m
This is an increase in the rate of tax for residential property over £2m from 5% to 7% from 22 March 2012. This will impact on freehold purchases and the grants or assignments of leases, where the consideration (or premium for the grant of a lease) is over £2m.. It may also impact on exchanges of land, transfers to connected companies and partnerships where the property value is in excess of £2m.
The legislation will include transitional provisions which mean that if exchange took place before 22 March 2012, the old rates will continue to apply.
Stamp Duty Land Tax Rate: Enveloping of High Value Residential Properties
This is a measure to combat the perceived large scale avoidance of stamp duty through owning property though companies (typically offshore companies). When the measure applies stamp duty land tax will be charged on the acquisition at 15%.
The charge will take effect when the purchaser is a “non-natural” person, which would include a company, a collective investment scheme and a partnership in which a non-natural person is a partner.
Of particular note is that there will be exclusions from charge for property developers and corporate trustees – in certain circumstances. The problem here is that a new developer will not benefit from this exception, since you’ll have had to have been in business for 2 years before the purchase. Perhaps it is time to consider alternative ownership vehicles such as limited liability partnerships.
This measure will apply from 21 March 2012, although there are transitional provisions for purchases where exchange occurred before that date.
Stamp Duty Land Tax Avoidance
This is a very targeted anti-avoidance measure designed to prevent the stamp duty land tax sub-sale rules from applying where the second step of the sub-sale is the grant or assignment of an option.
The provision took effect from 21 March 2012.
Other measures
There were some other measures announced in December to stamp duty land tax (SDLT) relief for acquisitions by NHS bodies to take into account changes under the Health and Social Care Bill and to extend the rules on disclosure of tax avoidance schemes.