Real Estate

High Value UK Residential Property – Urgent action required

By David Rodney, Citroen Wells Chartered Accountants

The UK Budget in March 2012 announced tax measures affecting UK residential property. This article concentrates on two proposals set to take effect in April 2013 which apply to residential properties valued at more than £2m and held within 'structures'. Structures may be in place to avoid inheritance tax and/or stamp duty land tax. In view of increasing values, anyone holding residential property worth more than £1.5m should consider the impact of the proposals. Commercial properties are not affected.

An annual charge on UK residential property held by 'non-natural persons', whether UK resident or not. Broadly, it will apply to corporate bodies but not trustees and established property development companies.

Bands and tax payable

Property value band

£2m-£5m

£5m-£10m

£10m-£20m

£20m +

Annual tax

£15,000

£35,000

£70,000

£140,000

A capital gains tax charge on disposals from April 2013 of UK residential property by non-resident 'non-natural persons'. Broadly, it will apply to corporate bodies and also to trustees whether corporate or not. Currently such persons are outside the scope of UK capital gains tax.

The charge will apply to gains on UK residential property where the consideration exceeds £2m. It will also apply to the gains on disposals of assets (of whatever form) that represent directly or indirectly such residential property. In view of increasing values, anyone holding property worth more than £1.5m should consider the impact of the proposals.

The new charge will apply to the total gain accrued during the whole ownership of the property (and not only the gain accrued after implementation of the new charge in April 2013).The rate of charge has not yet been specified.

Planning. The new measures bring a major change to the tax cost of holding high-value UK residential property. Prospective purchasers need to decide how they should hold UK residential property. Existing owners need to know how much the proposals will cost and should consider restructuring ownership. Draft legislation is imminent, but planning should start now to enable unwinding of structures by April 2013: identify properties and structures; line up appropriate professional help; obtain any landlord consents.


DavidRodney sw 121pxDavid Rodney FCA CTA
Citroen Wells Chartered Accountants, London, United Kingdom
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David is a Chartered Accountant, Chartered Tax Adviser, member of the Faculty of Taxation and a Registered Auditor. He brings a great deal of energy and a wealth of experience to his work.David specialises in advising family businesses and individuals on monetary and taxation issues, including a large number of clients from overseas, "Non-Doms", and deals with most other general practice work. He heads Citroen Wells' barristers and chambers department working closely with fellow partner, David Marks.

At the tender age of 20, David became a Chartered Accountant. Not only was he the youngest ever to qualify, he was also a prize-winner by attaining 5th place in the country in his final exams.

Citroen Wells' partners include specialists with years of practical knowledge regarding the financial problems facing property investors, dealers and developers, both individual and corporate. Our clients range from large property development groups to private individuals with property investments, landlords, builders and other professional services in the construction industry. We offer a range of high quality accounting, financial and business services to all of our clients. We firmly believe that it is our business to know our clients' business, so that we can really work to the best of our abilities.

 

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