![\"Modern](\"http:\/\/www.goodmanjones.com\/blog\/wp-content\/uploads\/2014\/02\/High-Value-Residential-Property.jpg\")
<\/a><\/p>\nThe draft legislation covers the 15% stamp duty land tax charge<\/strong> that has applied to the acquisition of high value residential property since Spring 2012 and it confirms proposals for the Annual Residential Property Tax (ARPT)<\/strong> that will apply from 6 April 2013. In addition there are changes to the capital gains tax regime from 6 April 2013.<\/p>\n The legislation applies to \u201cnon-natural persons\u201d which includes companies and partnerships (if one or more of the partners is a company). Trusts are excluded from this legislation.\u00a0 Also excluded are genuine businesses carrying on a genuine commercial activity such as property rental or development and properties owned by charities for charitable purposes. Non-natural persons who purchase high value residential property have been subject to a 15% SDLT rate since March 2012. \u00a0Although the draft legislation confirms this proposal it also provides relief against the charge for genuine businesses carrying on a genuine commercial activity.\u00a0 Those entities would be subject to a 7% rate of SDLT. Non-natural persons who hold UK residential property valued at more than \u00a32m on certain specified dates will pay ARPT of between \u00a315,000 and \u00a3140,000<\/strong>, depending on the value of the property.\u00a0 The \u00a315,000 charge applies to properties whose value is between \u00a32m and \u00a35m.\u00a0 The measure takes effect from 1 April 2013 and the annual tax is payable on 31 October 2013 for 2013\/14 and \u00a0on 30 April for each subsequent year.<\/p>\n The amount of the ARPT will increase every year on an index-linked basis.\u00a0 The value bands will not be adjusted for inflation.\u00a0 Residential properties within the charge will need to be revalued every five years. Capital Gains Tax will be chargeable on both UK and non-UK non-natural persons when they dispose of interest in high value residential property that is subject to ARPT.\u00a0 Capital Gains Tax will apply to disposals on or after 6 April 2013 at a rate of 28%<\/strong>.\u00a0 The tax will only apply to increases in value of the property from 6 April 2013.\u00a0 This therefore rebases the property values to that date.\u00a0 Current indications are that the 28% will be subject to a form of taper relief where the property is just over the \u00a32m mark.\u00a0 This is to prevent distortion in the property market for properties worth marginally more than \u00a32m.<\/p>\n Taxation at a 28% rate is higher than the standard corporation tax rate for UK companies. It is felt that very few UK companies will fall into the ARPT charge and therefore the impact of this tax anomaly is believed to be minimal.<\/p>\n The draft proposals permit the sale of offshore companies which hold high value residential property to remain free of UK Capital Gains Tax. However the purchaser of the company shares will inherit the Capital Gains Tax base cost of the property which is owned by the company. This may lead to considerable Capital Gains Tax at a future time if the property was sold by the company.<\/p>\n <\/p>\n Conclusion<\/span><\/strong><\/p>\n The impact of the proposals is to provide a disincentive for future purchases of high value residential property to be made using a wrapper such as an offshore company<\/strong>. The disincentive is the 15% rate of stamp duty land tax and the ARPT, whose minimum annual charge is \u00a315,000.<\/p>\n Non UK owners of existing structures will need to weigh up the cost of the ARPT compared to the possible saving of capital gains tax by sale of the wrapper free of CGT. \u00a0\u00a0There is also protection against UK Inheritance (Death) Tax by holding high value property in offshore structures. Owning properties in these wrappers is not just for tax reasons.\u00a0 For example, some individuals hold them in offshore companies for privacy reasons.<\/p>\n If an existing structure is going to be caught be the new provisions then consideration should be given to restructuring the way property is owned before 1 April 2013.<\/p>\n <\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" On 31 January 2013 the long expected draft legislation on the taxation of high value residential property was released. Properties are high value if they are worth more than \u00a32 million. The draft legislation covers the 15% stamp duty land tax charge that has applied to the acquisition of high value residential property since Spring[…] <\/p>\n
\nStamp Duty Land Tax<\/span><\/strong><\/p>\n
\nAnnual Residential Property Tax (ARPT)<\/span><\/strong><\/p>\n
\nCapital Gains Tax<\/strong><\/span><\/p>\n