Current UK tax issues for UK real estate
By Naomi Lawton, Memery Crystal LLP
The UK has seen considerable development over recent years in its tax regime on UK property, particularly residential property held by non-UK residents and non-UK domiciliaries.
First, the rates for stamp duty land tax (SDLT), which is payable by the buyer on the purchase price of UK property, have steadily increased over recent years for residential property (now up to 15 per cent). This is in contrast to commercial property rates of SDLT which have stayed at a maximum of 4 per cent. There was another significant rise in the SDLT rates for high-value UK residential property in December 2014, and it is already having an effect on the number of such transactions taking place.
Second, in 2013 the UK introduced the “annual tax on enveloped dwellings” (ATED) which is an yearly tax levied on residential property held in a corporate vehicle. The rates payable have recently gone up. There are exceptions, but these are not always straightforward.
Third, the new UK government announced this summer that, with effect from 2017, any offshore company deriving its value from UK residential property will now be subject to UK inheritance tax (IHT) charges for non-domiciliaries. This is a significant change in the law.
Fourth, there have been several changes to the way in which non-resident companies and individuals are taxed on gains realised on the sale of UK residential property. The aim is to capture such gains and tax them in the UK.
The significant inheritance tax change does not come into effect until 2017. It is hoped that that this unusual prospective approach means that a period of stability is to follow. There is therefore now time to restructure.
It is also important to recognise that non-tax benefits remain relating to the holding of property through companies or other entities. Privacy and separate legal personality is very valuable to some investors. The administrative burden and cost of dismantling existing structures will also be relevant.
Naomi LawtonMemery Crystal LLP, London, United Kingdom
T: +44 20 7242 59 05
Naomi Lawton is a senior associate in Memery Crystal’s tax department. She advises businesses and individuals on a wide range of direct and indirect tax issues, both in the UK and internationally. She has advised on business structures, corporate acquisitions, disposals and reconstructions, real estate and employment issues. Naomi also has particular expertise in dealing with cross-border tax matters. These include double tax treaty planning, holding company structures, relocations and questions of residence and domicile.
Published: October 2015 l Photo: Colourbox.de/Leonid ANDRONOV