There can be a significant tax hit where residential UK properties are owned by a non-natural person. This includes a company, partnerships with corporate members and collective investment schemes. Since April 2013 we have had to consider the consequences for these types of structures where the property is valued at more than £2m. The three tax points are:
1) A 15% Stamp Duty Land Tax charge (SDLT) will apply on acquisition of the property.
2) An annual tax charge (ATED) and the submission of a formal return. The charge starts at £15,000 for a property worth £2m and increases in line with valuation bands set by HMRC.
3) Capital Gains Tax (CGT) at 28% on disposal.
Extending the measures
These measures have been extended but not all at the same time:
- From 20 March 2014, the SDLT will now apply to any property valued at more than £500,000.
- From 1 April 2015, the ATED will also apply to properties worth more than £1m and the charge will be £7,000 per year.
- From 1 April 2016, the ATED will extend further to properties valued at more than £500,000 and will be £3,500 per year at this level.
- The CGT charge will also apply to properties worth £1m and £500,000 in 2015 and 2016 respectively.
What can you do?
If you own a UK residential property via a non-natural person and the extension of these rules affects you then it is time to consider whether the holding structure is still appropriate. You need to think about the long term benefit of retention and consider the tax cost of restructuring if that is a viable alternative.