In the Budget 2014 the Government announced measures which extend the current Stamp Duty Land Tax (SDLT) and Annual Tax on Enveloped Dwellings charge (ATED) where properties are acquired/held by non-natural persons. Legislation effecting these charges will be contained in the Finance Bill 2014.
In addition the Capital Gains Tax (CGT) charge on enveloped dwellings is similarly being extended. Legislation affecting this charge will be contained in the Finance Bill 2015.
The Budget in 2012 introduced a number of measures relating to the taxation of high value (over £2millon) residential properties held by non natural persons (see our briefing note). These were in summary: SDLT at the rate of 15% on the acquisition of a residential property; ATED (the amount of tax payable being dependant on the value of the property); and CGT at a rate of 28% on gains made on the disposal by a non-natural person.
The Government announced in the 2014 Budget that the 15% SDLT rate will be extended to properties worth more than £500,000 for transactions with an effective date on or after 20th March 2014. Transitional rules will apply the existing threshold to contracts entered into before this date.
ATED will have two new bands. Properties valued over £1million and up to £2million will be chargeable from 1st April 2015 with an amount of £7,000 in 2015/16. In the first year returns will not be required until 1 October 2015, with the tax payable by 31st October 2015. Properties valued over £500,000 and up to £1million will be chargeable from 1st April 2016, with an amount of £3,500 in 2016/17. The ATED charges will be annually indexed by reference to the Consumer Prices Index.
ATED related CGT will be extended to mirror the extensions to ATED itself. So the ATED related CGT charge will take effect: from 6th April 2015 for properties worth more than £1million up to £2million and from 6th April 2016 for properties worth more than £500,000 up to £1million. The charge will only apply to the part of the gain that accrues on or after the relevant date the property falls into charge to ATED.