In April this year the Government is introducing new taxes on UK residential property with a value of £2 million or more (high value residential property) that are owned indirectly through corporate and certain other structures. This follows on from the introduction last year of a 15 per cent SDLT charge on the purchase of high value residential property owned by such entities. With effect from 1 April, there will be an additional annual SDLT charge on high value residential property owned by: a company, a partnership with one or more corporate partners, or a collective investment scheme (such as a unit trust) (non-natural persons). The charge applies whether the entity is UK or offshore. The level of charge depends on the value of the property and ranges from £15,000 to £140,000. With effect from 6 April, non-natural persons which are offshore will also be subject to capital gains tax on the sale of high value residential property at the rate of 28 per cent.
The annual SDLT charge will significantly increase the costs of holding UK residential property in non-natural structures. The sale of the property held under an offshore structure may also be caught by the new capital gains tax charge, although depending on the precise circumstances, it may be possible to arrange the sale in a way which avoids the new charge. More positively, it will still be possible to sell shares in an overseas company that owns high value property without any SDLT or stamp duty charges.
If you currently own high value residential property indirectly through a non-natural person, you may want to consider the possibility of un-winding your existing structure and putting in place a new structure before 1 April. Whether this is advisable and feasible will require careful consideration of all of your particular circumstances.
If you are considering buying high value residential property, careful consideration will need to be given to the best structure for making the purchase.
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Client Alert 2013-026