From 20 March 2014, the threshold for which a property purchased through a “non-natural person”, such as a company or collective investment scheme, can be subject to a 15% Stamp Duty Land Tax charge was lowered to £500,000.
In addition, individuals acquiring residential property valued at £1 million or more via such structures will be subject to an annual charge from 6th April 2015 of at least £7,000, with rates increasing subject to the value of the property acquired.
From April next year, this threshold will be lowered again to £500,000, where properties will face a charge of £3,500, bringing this in line with the current SDLT regime.
Additionally, the UK government extended the scope of capital gains tax “more generally” to non-UK residents acquiring residential property from 6 April this year. Previously, such individuals were typically outside the scope of this tax charge.
As a result of these reduced charging bands, a significant number of offshore structures will be brought into the scope of a charge, which could lead clients to consider alternative vehicles for residential property purchases or restructure their existing holdings.
Expat
Sean Bannister, partner at Edwin Coe, said structures that previously allowed expat homeowners to reduce their exposure to UK tax are increasingly being replaced with mortgages.
In the past, purchasers had typically used a non-UK resident company to acquire residential property, potentially avoiding Inheritance Tax, Capital Gains Tax, and the ability to mitigate their UK income tax exposure in situations where they were seeking to let the property.
“A number of banks are willing to offer mortgages to their existing clients looking to acquire residential property in the UK,” he said. “Such products are not marketed very widely but they do exist, and will become increasingly relevant to individuals who would have previously utilised a non-resident structure to acquire such interests, especially those who are concerned about their potential exposure to UK IHT as result of acquiring property personally”
