By Toby Price, Tax director
As expected following the Chancellor's comments over the
weekend, the Stamp Duty Land Tax (SDLT) focus was very much on
expensive residential properties and most of the SDLT measures are
concerned with residential properties over £2 million. From
22 March 2012, individuals will pay SDLT at the rate of 7% on
buying such property.
And, effective from the day of the Budget, companies making such a
purchase will pay at 15%. This much higher rate for companies (and
certain other non-natural persons) is rooted in the perception that
companies are used as a vehicle to avoid SDLT by allowing
subsequent changes of ownership to be effected through share sales.
The action against this 'enveloping' is punitive, as the
Chancellor had warned it would be. It also does not apparently
distinguish between special purposes companies and those companies
(or funds) which hold multiple assets, or indeed are widely
held.
And this is only round one. On the same basis, the Government
also announced consultation on an annual levy where such properties
are held by companies. The levy would be based on the value of the
property, starting at £15,000 but increasing on a scale to
£140,000 where the value is greater than £20m. More
detail is no doubt to come, including whether the 15% entry charge
and annual levy, which will commence in April 2013, will be
cumulative.
Another SDLT measure is to amend Subsale relief to make it clear
that it does not apply to the grant of options. This measure, which
applies to residential and commercial property, is immediate and is
to block a specific scheme which, for the record, most thought did
not work anyway.
In addition, the Chancellor announced that SDLT will be included
within the scope of the General Anti Avoidance Rule (GAAR),intended
to be introduced next year, and that there will be consultation on
simplifying certain aspects of the SDLT lease duty rules.
Although more detail is needed on the annual levy, these measures
are perhaps more straightforward than the land rich property rules
which many other jurisdictions have and which had been proposed by
the Government in the UK twice before (in 2002 and 2007). The
measures are tough on high-end residential property and, in a
parting shot, the Chancellor's speech included a warning that
he would not hesitate to take further action in this area swiftly,
without notice and retrospectively.
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