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SDLT changes will mean £2m properties disappear from market

Homes around the £2m mark are likely to disappear from the market as a result of government changes to stamp duty land tax (SDLT) for high-value property ownership, says law firm Boodle Hatfield.

7 June 2012

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The government last week (31 May 2012) published a consultation document on the taxation of residential property. It provides further information on the proposals to introduce a new annual tax on the value of residential properties worth over £2m which are owned by ‘non-natural persons’, and to extend the capital gains tax (CGT) regime to disposals of such properties which are owned by non-resident non-natural persons.

Both measures are due to come into force in April 2013.

‘Non-natural persons’ includes companies, collective investment schmenes and partnerships with a corporate partner. It does not include trustees (other than bare trustees), charities, or bona fide property development businesses, provided the business has been operating for at least two years and the property was acquired for re-development and re-sale.

An annual charge of between £15,000 (for properties valued at £2m to £5m) and £140,000 for those worth more than £20m will apply.

The consultation also extends the scope of CGT to the disposal of high-value UK residential property by ‘non-resident non natural persons’ where the property is sold for more than £2m.

“The CGT charge applies more broadly than the annual charge or the 15 per cent SDLT rate and will be payable by trustees, personal representatives, clubs, associations as well as companies and collective investment vehicles,” says Stephen Green, a solicitor in Boodle Hatfield’s private client and tax team.

“It is not clear, however, how the extended CGT charge will fit in with the current rules that tax gains of offshore trusts on UK resident beneficiaries. It is also unclear whether the normal CGT rates will apply or whether a new penal rate will be introduced.”

“These proposals will have significant consequences for those purchasing or owning property around the £2m cliff edge,” says Stephen. “It would not be at all surprising to see homes around the £2m mark disappear from the market as the costs of acquisition and ownership soar.”

Responses to the consultation should be submitted by 23 August 2012.

For the full consultation document see http://www.hm-treasury.gov.uk/d/consult_ensuring_fair_taxation_residenti...