Budget 2014 contained a number of announcements that will impact the property sector. In addition, several Government consultation documents are awaited that could lead to further future changes.
Extension of the Annual Tax on Enveloped Dwellings ('ATED') , capital gains tax and 15% SDLT rate to residential properties over £500,000
The Government has announced the extension of existing measures to tackle perceived tax avoidance by those acquiring or owning residential property within wrappers. To further discourage individuals using companies or other vehicles to own their homes, the Chancellor has announced that certain anti-avoidance rules introduced in 2013 on homes worth over £2m will now apply to homes worth over £500,000.
This will start with an increase of the rate of SDLT to 15% on acquisitions, effective tomorrow (up from 4% or 5%). It will then be followed by the company paying an annual levy ('ATED') for each year it owns the property. For properties between £1m and £2m the annual levy will be £7,000 (effective from 1 April 2015), and for properties between £500,000 and £1m the levy will be £3,500 (effective from 1 April 2016). Lastly, any disposals by those companies falling within the ATED regime will be subject to capital gains tax at 28% (whether non-resident or a UK company).
Although there are a series of reliefs for property investors, developers and traders, the reliefs will now need to be claimed on a greater number of properties than previously. However, the Government has announced that it will consult on possible simplifications to ATED administration to reduce compliance burdens for genuine property rental, trading and development companies.
The extended measures will act as a disincentive to investors using wrappers to invest in residential property but leaving it empty or under-used without paying tax...
For an extended version of this article please follow this link to the Economia website.
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