Taxation of UK Residential Property held by Non-Natural Persons
In April 2013 new regulations were introduced for non-natural persons (eg Companies) owning UK residential property valued at over £2,000,000 that were not being rented out:
− 15% stamp duty
− A new annual charge called the Annual Tax on Enveloped Dwellings (ATED)
− Capital gains tax (CGT) at a rate of 28% on the sale including overseas non-natural persons
In the Chancellors Budget on 20 March 2014 it was announced they would be phasing in a reduced hreshold to £500,000 by 1 April 2016 for the annual ATED charge and the CGT on the sale of UK property owned by nonnatural persons. The 15% stamp duty applies to all properties purchased by non-natural persons over £500,000 from 20 March 2014. But again this is only applicable to properties not rented out.
Any non-natural persons owning UK property with a value over the threshold must submit an ATED return.
This applies even if the property is being rented out and there is no tax payable. The exemption simply needs to be claimed on the return.
Although most of our clients will be exempt from any ATED payment, failure to submit a return could lead to
penalties being applied. With the threshold at which returns are required to be submitted being reduced significantly, many more investors will need to arrange for returns to be prepared.
Benham & Reeves Residential Lettings can assist with the submission of ATED returns and further information relating to this can be found at this link www.brlets.co.uk/atedreturnservice.pdf
Introduction of Capital Gains Tax for Non Residents
Separately in the Autumn 2013 statement it was announced that there would be capital gains tax to all overseas owners from April 2015.
However this will only apply to future gains from April 2015, therefore any gains up to that date from a sale
after April 2015 will continue to be exempt. The rate has not been announced but it is widely expected to be
18% of any net gain for basic rate taxpayers and 28% for higher rate taxpayers. Very little has been announced on this and a consultation will shortly be underway and we will then have more information to report.
These measures do mean that investors will need to be aware of the value of their properties and we can arrange professional valuations to be carried out if required.
By Vidhur Mehra, Finance Director
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