Homes Worth Over 2 million pounds!
Newsletter issue - July 2012.
The Government wants to clamp down on tax avoidance by people who purchase their homes through companies, or other structures like trusts or partnerships, (known as non-natural persons). It is proposing new tax charges will be applied follows:
a) From 1 April 2013 an annual charge will apply on the value of residential property worth £2 million of more owned by non-natural persons; and
b) From 6 April 2013 Capital Gains Tax (CGT) will be charged on the disposal of residential property where the selling price is £2 million or more, and the seller is a non-natural person who is not resident in the UK.
There will be an exemption from the annual charge for established property development businesses, but only if the business has been operating for at least two years.
When a UK based company sells a property it already pays UK corporation tax on the gain, similarly a UK based partnership or trust would pay UK tax on any profits it makes selling property in the UK or elsewhere. A company or other non-natural person based outside the UK for tax purposes does not pay UK tax on the sale of a UK property, so the new CGT charge is designed to level the tax playing field with UK-based property owners.
If you own high value residential property within a company or other structure you may want to take steps to remove it from that structure, especially if the company is based outside of the UK. There may well be other issues to consider in removing a property from the structure so please talk to us before taking any action.