Extracts from the Chancellor of the Exchequer’s Budget Speech 19th March 2014:
12:56: “We are expanding the new tax we introduced to stop people avoiding stamp duty by owning homes through a company,” Mr Osborne says. “From midnight tonight anyone purchasing residential property worth over half a million pounds through a corporate envelope will be required to pay 15% stamp duty.” and
12:59: “We are expanding the new tax we introduced to stop people avoiding stamp duty by owning homes through a company. We will expand the tax on residential properties worth over £2 million to those worth more than £500,000.”
Rufus Ballaster (Partner) comments: There are numerous good commercial reasons for people to choose to hold properties in a corporate vehicle but today’s announcement that the penal 15% SDLT rate will apply to dwellings of £500,000 or more and the extension of ATED (annual tax on enveloped dwellings) to homes held in corporate vehicles closes the door on very many people wanting the flexibility a corporate entity gives them. Many families have historically purchased in a company due to the ease with which shares can be given to the next generation as a sensible method of sharing wealth rather than hoarding it but few international investors will be spending less than £500,000 on a property and even if they are, what of the future? Having seen the “Mansion Tax” provisions start at £2M but now drop down to £500,000 they could not be confident of a future budget leaving the limit at that point. It could become something applicable to every corporate ownership of UK property which is a worrying thought. Now is the time:
- To review past investments to test if revised ATED will apply
- To analyse the cost of the tax compared to the benefits corporate ownership can achieve
- To de-envelope where the new tax payable will exceed the benefit of the structure
- To consider any project which is pre-exchange (maybe even some pre-completion) in case personal ownership is the better option with the new lower limit applicable to the 15% SDLT rate and ATED.
For more information please contact:
Rufus Ballaster the Head of our Banking and Lending Team (RufusBallaster@cartercamerons.com)
Michael Woodward our Consultant on Wealth Advisory and Tax (MichaelWoodward@cartercamerons.com)
