Extension of property tax takes us well beyond ‘mansion’ territory
The Budget saw announcements that:
· The 15% Stamp Duty Land Tax (SDLT) rate will apply to the acquisition of residential property worth £500,000 by a company or other ‘envelope’ from 20 March (down from the previous threshold of properties worth £2m)
· Legislation will be introduced in Finance Bill 2014 to reduce the current threshold at which the Annual Tax on Enveloped Dwellings (ATED) bites from £2m to £500,000 phased in over the next 2 years. A new band for ATED applying to properties worth more than £1million with an annual charge of £7,000 will apply from 1 April 2015. An additional band, from 1 April 2016, will apply for residential properties worth more than £500,000 with an annual charge of £3,500
· Companies and other ‘envelopes’ within the new phased in ATED bands will also be subject to CGT on sale of the properties held at a rate of 28% under legislation to be introduced in Finance Bill 2015
These changes are together expected to raise an extra £90 million a year from 2016-17.
The Government is already proposing that, from April 2015, a capital gains tax (CGT) charge will be introduced on future gains made by non-UK residents disposing of UK residential property.
CIOT President Stephen Coleclough commented:
“This is yet another round of changes to the UK’s property taxes regime, following on from the introduction of ATED and changes to CGT and stamp duty rates.
“Properties worth £500,000 take us well beyond the mansions and oligarchs that it was suggested the policy was originally aimed at. Receipts for the ATED have been higher than the Government expected. Although the Government classify this as an anti-avoidance measure there is more than a hint of general revenue raising about this measure. It is ‘pushing the envelope’ somewhat to see it only as anti-avoidance.
“These measures look like part of a move to raise a greater proportion of taxes from property. If so there should be wider discussion and consultation.”
Notes to editors:
1. The introduction of the Annual Tax on Enveloped Dwellings (ATED) was part of a package of measures with the stated aims of tackling Stamp Duty Land Tax (SDLT) avoidance through the ‘enveloping’ of high value residential property (£2m plus) into a corporate wrapper and ensuring that individuals and companies pay a ‘fair’ share of tax on such property. There were three elements to the package of measures:
a. The introduction of a 15% rate SDLT with effect from 21 March 2012 on the acquisition of residential property costing more than £2m by non- natural persons ( companies, partnerships that include a corporate partner and collective investment vehicles).
b. ATED: an annual charge on residential property valued over £2m owned by the same non- natural persons, from 1 April 2013.
c. The extension of Capital Gains Tax (CGT) to gains on disposal of residential property over £2m by non-natural persons.
2. The Chartered Institute of Taxation
The Chartered Institute of Taxation (CIOT) is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.
The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries. The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.
The CIOT’s 17,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.