Significant changes have been made to the taxation of UK residential property in recent years, making it increasingly difficult to determine the correct holding structure. Certain measures (e.g. Annual Tax on Enveloped Dwellings (ATED), 15% Stamp Duty Land Tax (SDLT)) appear to deter ownership of residential property through companies whereas other measures (e.g. interest relief restrictions for income tax payers and the reduction in the capital gains tax (CGT) rate on shares) appear to encourage corporate ownership.
The Annual Tax on Enveloped Dwellings regime first introduced in October 2013 now captures any residential property valued at over £500,000 on 1 April 2017 owned by a corporate. Properties that have been within the ATED charge previously were required to be revalued as at 1 April 2017.
Do you hold UK residential property via a corporate structure? Have you considered if ATED applies?
ATED CGT is a charge relevant to the disposal of high value residential properties which are held by non-natural persons (‘’NNPs’’) and within the ATED regime. ATED CGT applies to disposals on or after 6 April 2013 and was introduced as part of a suite of measures to deter the acquisition and ownership of UK residential property through a corporate envelope.
From 1 April 2016 higher rates of SDLT apply to purchases of additional residential properties, such as second homes and buy to let properties.
The taxpayer was a public house owner and had acquired a dwelling to convert into a bed & breakfast to run as part of its existing business. It claimed relief from 15% SDLT under para 5B of Sch 4A (trades involving making a dwelling available to the public).
Rob Walker, Real Estate Tax Leader, comments on the abolishment of stamp duty for first-time buyers on properties up to £300,000.