Homeowners with properties worth over £2m could find themselves paying more tax under new rules being introduced by the Government.
The move was announced during the Budget as part of a package of measures to tackle tax avoidance and ensure that individuals and companies pay a fair share of property tax.
The proposed new rules will only affect those people that are:
- planning to buy a residential property worth over £2m or more after April 2013, or
- homeowners that already own residential property worth over £2m in a company or trust structure.
The Government is proposing to introduce two changes:
Annual Property Tax
- An annual tax charge will be levied on the value of UK residential property held by any non-natural person (for instance through an offshore company where the value exceeds £2m).
- Properties will be ‘banded’ by value as 1 April 2012, or on acquisition if later.
- The maximum annual charge per property held by a non-natural person will range from £15,000 to £140,000 – the maximum applying to properties worth more than £20m.
Capital Gains Tax
Up until now, non-residents have not been liable to pay Capital Gains Tax (CGT), however under these new rules, non-natural persons who are not a UK resident will pay CGT on any profits from the sale of residential properties over £2m. In contrast to the definition for the annual charge, it would appear to include non-resident trusts for this purpose.
Paul Belsman, RSM Tenon’s Head of Tax, said: ‘Whilst there is no doubt that some people have purchased property through other vehicles to avoid stamp duty land tax, many individuals have used these arrangements for other purposes such as inheritance tax planning. People that have entered into this type of planning, for whatever purpose, will need to talk to their financial adviser to review the impact of these proposals urgently.’