Legal News

The uncertainty at the top end of the property market was to continue for some more months as the controversial budget proposals on annual wealth tax on homes was still in consultation stage.
With so many U-turns on other reform plans it would be worth while to wait and watch what George Osborne would eventually announce in regard to the proposed plans to raise taxes on £2m-plus properties.

When the announcement was made the London property market went into immediate turmoil, with companies and funds putting a hold on their purchases. There has been strong lobbying of the Chancellor to revert his announcements.

The consultation is due into two of the Budget proposals, an annual tax on homes valued over £2m which were owned by ‘non-natural persons’, such as companies and property funds; and the extension of Capital Gains Tax to the disposal of properties by non-natural persons.

All non-natural persons, including UK companies, partnerships and funds, and off-shore companies were brought into its ambit.

The consultation was not on the increasing of Stamp Duty Land Tax to 15% on the purchase of £2m-plus properties by non-natural persons. That came into immediate effect on Budget Day itself, March 21.

But the issue of hike in stamp duty was also part of the consultation paper because ‘stakeholders’ had raised concerns over the hike in Stamp Duty, as well as the annual charge.

The paper was clear in as much as that the Government wanted to discourage the practice of buyers using companies or investment vehicles to gain tax advantages.

The new annual charge was also proposed to deter avoidance as well as to ensure the owners of high value residential property to pay their fair share of tax’. The plan was to introduce the charge in the Finance Bill 2013.

Properties which are over £2m and owned by non-natural persons would have to be revalued for tax purposes every five years, starting at the value on April 1, 2012, or on acquisition if later. Owners would self-assess the charge, within price bands set by the Government.

But the HMRC would have powers to challenge an owner’s self-assessment and would strongly pursue any non-payment.

The consultation closes on August 23, and can be found on the Treasury website