Stay One Step Ahead of Possible Tax Changes

There’s been a lot of discussion about the UK Government’s proposals to change how high value UK residential property is taxed. In a nutshell, the Government is aiming to deter tax avoidance and ensure owners of high value (£2m+) residential properties pay their share of tax.

The proposals were put forward some time ago, aimed at property owners who hold property within an ‘envelope’ such as a company or trust. Ideally, they would like owners to take properties out of the ‘envelope’ so as to not avoid stamp duty on a future sale.

The Government’s Proposals
For those that don’t wish to do this,there will be 2 implications. Firstly, they are proposing an annual charge for certain non-natural persons owning a property valued at £2m or over (per property). This could range from £15,000 pa for a property valued at £2m – £5m, to £140,000 pa for a property valued at £20m+.

Secondly, the Government is proposing an extension of Capital Gains Tax (CGT) which will apply to gains on the disposal of UK residential property by non-resident, non-natural persons. This would align the tax treatment on gains on such disposals by non-residents to that of UK residents. It would apply when the value of the consideration on disposal is over £2m. CGT would apply to the total gain accrued during the period of ownership, not just the gains accrued after the implementation of the new measures.

What Happens Next?
So far these are just proposals so we cannot be sure of their actual extent. But after discussions with reliable sources we understand that the proposals will probably go through, however some of these measures are likely to be relaxed.

Also, because the measures are likely to apply only to each individual property valued at over £2m (not a property portfolio valued at £2m in total), many overseas owners will not be affected.

The Chancellor will make an official announcement on 11 December and, of course, will let you know the details as soon as they are announced.

Update (12/12/12):
Announced: https://www.benhams.com/news/landlords/proposed-property-tax-changes-a-sigh-of-relief-for-londons-landlords/