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Monthly Archives: April 2012
SDLT on Residential Property Transactions
New rates of SDLT
In the Budget on 21 March 2012 the Chancellor announced a new 7 per cent rate of Stamp Duty Land Tax (SDLT) for residential property transactions where the chargeable consideration exceeds £2 million. The new rate applies to transactions where the effective date is on or after 22 March 2012, subject to transitional provisions for pre-existing contracts.
Additionally, the Chancellor announced a new higher 15 per cent rate of SDLT for residential property transactions by certain persons (broadly companies, collective investment schemes and partnerships with a member who is a company or a collective investment scheme) where the chargeable consideration exceeds £2 million. The new rate applies to transactions where the effective date is on or after 21 March 2012, subject to transitional provisions for pre-existing contracts.
There are also two exclusions from the higher charge, firstly for companies acting in the capacity of trustee of a settlement and for bona fide property developers who meet the qualifying conditions.
SDLT Annual Charge and CGT Charge Consultations
In addition the Government will be launching two consultations (expected to be published in May 2012). The first will involve the introduction of an annual charge on residential properties over £2 million owned by certain non-natural persons at rates expected to be between 0.3% and 0.7% depending on the property value.
If we assume that a property valued at £2 million will attract a charge of 0.3% then this means the annual charge would be £6,000.
The second consultation will relate to the introduction of a Capital Gains Tax charge on the sale of residential property owned by non resident, non-natural persons. Legislation in respect of each of these consultations will be introduced in Finance Bill 2013 and will come into effect in April 2013. Until the consultation papers are published we will not know the extent of the proposed charges or the scope of their application.
What to do next
Owners of high-value residential property held otherwise than by individuals should consider conducting a review of their portfolios once the consultation papers have been issued, to determine whether any restructuring would be desirable before April 2013 or the mechanisms by which the annual charge could be most efficiently paid.
Nothing in this note constitutes legal advice and it is intended as general guidance only.
If you would like to discuss this topic or any other matters of interest please e-mail us at firstname.lastname@example.org or telephone us on +44 207 7638 9271 and ask to speak to Richard Monkcom or Susan Perry.
Druces LLP Solicitors April 2012
My lease has come to an end, … hasn’t it?
In these times of economic uncertainty everyone in business is looking at ways of reducing their costs. If you are a business tenant, reviewing your property requirements is often an obvious starting point.
So you check your lease and see that there is a clause allowing you to bring your lease to an end early by serving a break notice and that the date for serving the notice is coming up shortly. You decide it would be in the best interest of the business to take advantage of this. You have plenty of time to serve a notice and the lease tells you what you must and must not do to get it right. It all looks pretty straightforward so you ask your in-house property administrator to get the notice off to the landlord.
Confident that all is well you make plans to leave the building and maybe even sign up to relocate. Your rent is up to date and you are going to make sure you leave the property in good repair when you go.
Out of the blue the landlord refuses to accept that the lease has come to an end on the break date. It turns out your notice is defective or you have not complied fully with the pre-conditions in the lease for the valid operation of your break notice and it is too late to put things right. Your lease is not going to end after all.
We have seen many cases of tenants getting what appears to be a relatively simple process wrong because the law relating to the preparation and service of break clauses and compliance with pre-conditions is so strict. In a recent case, Avocet Industrial Estates LLP -v- Merol, the tenant’s failure to pay £130 of interest arising out of the late payment of rent under its lease was enough to mean its break notice was ineffective, leaving it liable for 5 more years of rent, service charges and other costs.
The consequences of getting a break notice wrong can often be financially very serious – you may have tried to break a 25 year lease at year 10 and suddenly have another 15 years to go. In a weak letting market, landlords do not want to lose income from existing tenants, so many are unlikely to waive their strict contractual entitlements to continue treating a lease as continuing when a break notice has been incorrectly prepared or served.
You might think it is not worth asking a lawyer to review your lease or to serve the break notice for you. However, we know what the potential pitfalls are and we know how to avoid them. Using us could save you a substantial amount of money in rent, service charges and insurance premiums. Money well spent.
Please give me, Karen Chapman, Partner in Druces LLP’s Property team or Julian Johnstone, Partner in Druces LLP’s Litigation & Dispute Resolution team a call if you would like us to help you draft and serve your break notice and advise you as to your lease obligations generally. We can also help you if you are relocating to new premises
Administration Sales and TUPE: Normal Service Resumed
For many years, the accepted way to rescue a company and preserve employment and at the same time maximising return to creditors has been administration followed by the sale of the business and assets to a purchaser (usually by a ‘pre-pack’).
The automatic transfer of the employees to the purchaser under the Transfer of Undertakings (Protection of Employment) (TUPE) Regulations invariably applied to a business sale out of administration. That remained the case until 2006 when a new regime (TUPE Regulations 2006) came into effect on 6 April of that year. This introduced an element of uncertainty for purchasers, administrators and employees. Fortunately that uncertainty has now been resolved following a clear Court of Appeal Decision in Key2Law (Surrey) LLP -v- De’Antiquis .
Richard Baines, Head of Druces LLP’s Business Turnaround, Restructuring and Insolvency team and Scott Thistleton, a trainee solicitor at Druces LLP consider in detail the issues surrounding the uncertainty and its resolution by the decision in Key2Law in their latest article published in the In-House Lawyer, April 2012 issue