Budget 2014 – Stamp Duty

Stamp Duty Land Tax (SDLT)

In a measure to help further tackle tax avoidance, the Chancellor extended the package of taxes that affect residential properties owned by “non-natural persons (NNP)”, other than genuine commercial businesses and other limited categories, to properties worth more than £500,000 (down from the previous threshold of £2 million). A NNP is generally a company, partnership with company members or a collective investment scheme (e.g. a unit trust).

These taxes are:

  • SDLT at 15% on the acquisition of a residential property
  • An annual tax on enveloped dwellings (ATED)
  • Capital Gains Tax at 28% on any gain on disposal

The extension to the 15% rate of SDLT will take effect for transactions where the date of completion is on or after 20 March 2014. There will be transitional provisions that will ensure the existing threshold will continue to apply in respect of contracts entered into before 20 March 2014 but completed after that date.

The new band for ATED applying to residential properties worth between £1m and £2m, with an annual charge of £7,000, will apply from 1 April 2015.

An additional band for ATED applying to residential properties worth between £500,000 and £1m, with an annual charge of £3,500, will apply from 1 April 2016.

All corporates and other “envelopes” affected by the new ATED band will also be subject to capital gains tax on disposal of the property at a rate of 28%. The extension to the ATED-related CGT charge will take affect from 1 April 2015, and 1 April 2016 respectively. The CGT charge at 28% will only apply to the gain that has accrued on or after the above dates.

It should be noted that not all residential properties owned by a company, for example, will have to pay the above taxes. There are various reliefs available, which must be claimed on an ATED return. Common examples are:

  • Properties let to a third party on a commercial basis
  • Properties part of a property developers trade
  • Farmhouses
  • Properties used by employees of a company, for the company’s commercial business
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May 22

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