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.
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