Property Taxes and the Overseas Investor

Published: 16 February 2013

The Chancellor of the Exchequer has had the overseas investor in UK property in his sights for some time and in particular the anti-avoidance schemes, that some investors adopt.  Yasmin Uddin, a Solicitor in our Property Team, considers the implications.

The mini autumn budget, which was revealed in December 2012, cemented the Chancellor’s policy to target anti-avoidance schemes for Stamp Duty Land Tax (SDLT) and other tax schemes. Already introduced last year was a new rate of 15% SDLT on the acquisition of residential properties priced at £2 million and applies to all "non-natural persons."  This includes companies, trusts and other investment schemes and applies from 21 March 2012.

A higher rate SDLT tax of 7% had been introduced in March 2012 for all purchases of property of £2 million upwards by all persons.

The 15% rate had been introduced to prevent SDLT mitigation by companies selling a property via a sale of the shares of the company.  This would then transfer ownership of the property asset attracting the reduced rate of only half a per cent SDLT on the share sale.  However the rate of 15% does not apply to existing properties already held by such entities.

Continuing with the Chancellor's aim to target high-value properties the "mansion tax" as it has become known, is to the subject of continuing consultation. This would be an annual tax on all properties valued at £2 million upwards, which would not only affect companies and trusts owning such properties, but also private individuals. It is possible that it will be retrospective, affecting all existing owners of such valued properties.
Overseas buyers should also be aware of the introduction of capital gains tax charges on residential property owned by non-resident, non-natural persons. It is proposed this will come into effect on 6th April 2013 and further guidance is awaited.

Further details about the introduction of the annual residential property tax, can be found by clicking here.  Fletcher Day will be pleased to work with your tax advisers in implementing recommended strategies when buying property.

For specific advice and information for overseas property investors please contact Yasmin Uddin, Consultant Solicitor in the Property Team.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.