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Summary of responses on ensuring the Fair Taxation of Residential Property Transactions
This consultation is part of a package of measures that the Government announced at Budget 2012 to ensure that individuals and companies pay a fair share of tax on residential property transactions and to tackle avoidance, including the wrapping of property in corporate and other “envelopes”.
The consultation specifically addresses the use of corporate and other envelopes to buy high value residential property and covers the budget announcements on:
- an annual charge on residential properties valued over £2 million owned by certain “non-natural” persons (broadly companies, partnerships including companies and collective investment schemes)
- the extension of Capital Gains Tax (CGT) to the disposal by certain non-resident non-natural persons of residential property, interests in such property, or the envelopes in which they are held
The Government is interested in hearing from all stakeholders who have a view on the coverage and impact of the annual charge and the extension of Capital Gains Tax.
Summary of responses
The Government has reviewed all responses received and would like to thank all those who have participated or responded to this consultation.
The Annual Residential Property Tax and extensions to the CGT regime will go ahead as planned in April 2013. Following consultation the Government has made the following decisions:
- the Annual Residential Property Tax (ARPT) legislation will include a series of reliefs to exclude, where possible, genuine businesses carrying out genuine commercial activity
- the 15 per cent SDLT rate legislation will be amended to include a series of reliefs to mirror those in the ARPT legislation, effective from Royal Assent of Finance Bill 2013
- these reliefs will also apply for the extended CGT regime, which will apply to disposals of high value UK residential property by non resident non natural persons (NNPs) from April 2013. The rate of the CGT charge on these disposals will be 28 per cent, with a tapering relief for gains where the property is worth just over £2million
- as non-resident NNPs are not currently subject to the CGT regime, this charge will apply only to that part of the gain that is accrued on or after 6 April 2013. These changes will come into effect from Royal Assent of Finance Bill 2013
Draft legislation for ARPT and 15 per cent SDLT rate was published on the 11 December in the Draft Finance Bill 2013.
The Government published some draft legislation providing further detail about the ARPT on 31 January, for inclusion in the Finance Bill 2013. This legislation includes some additional clauses promised in December and clarification of the reliefs to both ARPT and the 15 per cent rate of SDLT intended to exempt genuine commercial activities from the charge. The Government also continues to consider the responses to the current consultation on the draft legislation already published.
Draft legislation for Capital Gains Tax on non-natural persons disposing of high value residential property was published on 31 January, for inclusion in Finance Bill 2013. This provides for the Government decisions set out in the summary of responses, and the decision that, for consistency, Capital Gains Tax will also apply to non-natural persons that are resident in the UK in respect of gains built up on or after 6 April 2013. The legislation therefore contains provisions that include UK resident companies within the scope of the charge. The draft legislation provides that for UK companies affected, corporation tax will apply to the part of any gain built up before 6 April 2013, with the new Capital Gains Tax charge applying only to the gain built up on or after 6 April 2013.
As of 20 March 2013, the annual charge will be known as the Annual Tax on Enveloped Dwellings.