A new rate of 7% will be introduced where the chargeable consideration for a residential property is more than £2 million. This will have effect where the effective date (normally the date of completion) is on or after 22 March 2012, unless the contract was entered into before that date.
An even higher rate of 15% will apply to such residential properties if the purchaser is a ‘non natural person’, for example a company. This will have effect where the effective date of the transaction is on or after 21 March 2012.
In addition the government will consult on the introduction of:
- a SDLT annual charge where properties over £2 million are owned by non natural persons
- a CGT charge on residential property owned by non resident, non natural persons.
Both these measures will apply from April 2013.
The intention of the 15% charge is to stop or reduce the number of schemes which claim to allow a property to be transferred without SDLT. The charges to be introduced in 2013 are aimed at charging properties already in companies which are used as residential accommodation.
The main motive in the past for using a company to buy a UK property has usually been to avoid Inheritance Tax (IHT) on the death of an individual owner. That may remain a valid reason, but is likely to be outweighed by the new tax charges.
Simple purchase by an individual may be the best route in future, supported by life insurance written in Trust if IHT is a serious concern.
The new rules are scheduled for 6 April 2013 so there is time for existing owners to plan, but there is on-going consultation on these changes so please don’t take any steps without speaking to your adviser first. You find out more by reading the HMRC SDLT Release
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