The Chancellor's 2014 Budget, announced on 19 March 2014, set out a number of changes and extensions to the post-2012 stamp duty land tax ("SDLT") regime.

Background

The 15% SDLT rate was initially introduced in April 2012 and applied where a company bought a 'single dwelling' property for over £2 million. The Chancellor was clear that these provisions were intended to deal with stamp duty tax avoidance in relation to purchases of residential property.

A new legislative schedule was introduced to deal with the 15% rate, as a self-contained regime. As a reminder, the key provisions of this schedule are:

Single dwelling: this is a different definition from that of 'residential property' under the Finance Act 2003. The first part of the definition is that a building or part of a building will count as a dwelling if it is used or suitable for use as a single dwelling or is in the process of being constructed or adapted for such use.

Companies: the 15% rate only applies where the purchaser is a company; where one of the members of a partnership carrying out the acquisition is a company; or where the acquisition is made for the purposes of a collective investment scheme.

Exclusion include:

  • circumstances where a corporate purchaser is a bona fide property developer;
  • buying, developing and letting; and
  • companies acting in their capacity as trustees of a trust (provided that this is not a bare trust).

Update in Budget 2014

Legislation will be introduced in the Finance Bill 2014 to reduce the current threshold in relation to the 15% rate for companies from £2 million to £500,000.

The new threshold will apply to land transactions where the effective date is on or after 20 March 2014. Transitional provisions should exclude from the rules most transactions effected under contracts entered into before 20 March 2014 even though completed on or after that date.

Linked issues

Other provisions intended to tackle perceived tax abuse in relation to residential property are capital gains tax (CGT) and the annual tax on enveloped dwellings (ATED). Legislation will be introduced to charge CGT on future gains made by non-residents disposing of UK residential property. The ATED threshold has also been reduced to £500,000 with the staged introduction of new bands coming into effect for properties with a value between £500,000 and £1 million and between £1 and 2 million.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.