Major changes to Stamp Duty Land Tax rates for the taxation of UK property worth more than £2 million were announced in the budget earlier this year.
A significant change is the proposed introduction of an annual charge on residential properties worth more than £2 million which are held by a Company, regardless of whether it is a UK or non-UK Company. This change is intended to be introduced from April 2013 and there is a proposed tiered system of charges which are set out below.
Property value £2m – £5m £5m – £10m £10m – £20m £20m>
Annual charge £15,000 £35,000 £70,000 £140,000
The changes already made this year, effective from 22 March 2012, were:
- An increase in the rate of Stamp Duty Land Tax (SDLT) from 5% to 7% for properties acquired for than £2 million.
- The introduction of a 15% SDLT rate for properties acquired for more £2 million by any Company or other “non-natural” person such as a partnership one of whose members is a Company, or a collective investment scheme. There are tightly drawn exceptions for property development Companies whose businesses have been carried on for at least two years and for corporate trustees.
These changes and the government’s express objective of discouraging the use of Companies to own residential property will result in many ownership structures being unravelled. One way of extricating a property from a Company without incurring an SDLT charge is through liquidation and the annual charge will be avoided if this is done before April 2013.
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