Following the announcement of the budget yesterday, we have summarised a few points which are worth noting…

Corporation tax

The current corporation tax rate is 24%.

The government has announced that this rate will be reduced to 21% for the tax year 2013 to 2014 and 20% for the tax year 2014 to 2015.

Statutory Residency Test

From 6th April 2013, the Statutory Residency Test is being introduced to remove the uncertainty over an individual’s residency status for tax purposes.

The test will be set out in 3 parts which are as follows:

  • Automatic UK Resident;
  • Automatic Overseas Resident; and
  • Sufficient Ties.

  • It will also provide for a tax year to be split into a UK part and an overseas part in certain circumstances, and will contain new rules for taxation on income and gains arising during a period of a temporary period of non-residence.

    The concept of ordinary residence will be removed insofar as possible from tax legislation.

    This test will be welcomed by most, and it is hoped that the test will clear up the uncertainties which have led to many tax tribunal cases. It is also hoped that the introduction of this test will encourage individuals to invest in the UK without fear of being considered UK resident.

    The New Property Taxes

    As announced in the previous Budget, the government will be introducing an annual charge on residential properties valued at more than £2mil held by companies. The annual charges will be as follows:

  • £2mil – £5mil = £15,000
  • £5mil – £10mil = £35,000
  • £10mil – £20mil = £70,000
  • £20mil + = £140,000

  • The stamp duty land tax rate on properties valued at more than £2mil acquired by companies will remain at 15%.

    The legislation will extend the application of capital gains tax to disposals of properties valued at more than £2mil owned by a company. The rate of the charge will be 28%. Where a property is purchased before 6th April 2013 but disposed of after that date, the charge will only apply to the gain accrued on or after 6th April 2013.

    UK companies will be chargeable either to corporation tax or capital gains tax in the usual way.

    It is worth obtaining a valuation of the property as at 6th April 2013 so that when it comes to selling, any gains accrued prior to 6th April 2013 can be distinguished from the gains accrued thereafter.

    With regard to the above taxes, there will be reliefs available. The reliefs will cover the following:

  • Property development, investment rental and trading businesses;
  • Residential properties open to the public for at least 28 days a year on a
    commercial basis;
  • Residential properties held for employee accommodation;
  • Residential properties owned by a charity and held for charitable purposes;
  • Working farmhouses;
  • Diplomatic properties; and
  • Some other publicly-owned residential properties

  • Capital gains tax exemption

    In October 2012, the government announced its intention to introduce a new employee shareholder employment status. Employees adopting this status could receive between £2,000.00 and £50,000.00 of shares that were exempt from capital gains tax. It would also have the effect of reducing income tax and national insurance contributions liabilities by deeming that the employee has paid the sum of £2,000.00 for shares that they receive.

    It could be worth considering this scheme especially where there is scope for growth by a company. However, employees should bear in mind that this may affect their employment rights. Equally, employers who are not sure that they want to share their profit with their employees may wish to consider this to deter employees from bringing claims against them.

    Furthermore, giving an employee a share of a business can be an incentive for them to do all that they can to ensure that the business continues to grow.

    Please call us on 0207 183 0084 or email us on for a fixed fee conveyancing quotation and to ask us about any reservations or queries that you may have; we are always happy to assist.

    We are Residential & Commercial Conveyancing Specialists !

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    Ayesha Leslie, Partner
    Ola Leslie Solicitors