UK prime property tax details unveiledThe UK government has published details of draft legislation, which includes a new prime property tax.
Among measures included in the Finance Bill 2013 will be the new Annual Residential Property Tax (ARPT) – originally proposed as ‘an annual stamp duty charge’, which will be levied on properties worth more than £2million owned by certain Non-Natural Persons (NNPs) from 1 April 2013.
ARPT will start at £15,000 for properties worth £2million-£5million, reach £35,000 for properties from £5million-£10million, will cost £70,000 for properties between £10million-£20million and £140,000 for properties over £20million.
But there could be a way around the tax – by renting out the property for a short time.
The legislation implements tax policies previously announced in the March 2012 Budget, including aims to prevent stamp duty tax avoidance, creating annual charges of up to £140,000 and capital gains tax for high-end houses owned by companies.
More detail is expected to emerge over the coming weeks and months, however the proposed annual charges have been adopted with a new tax called ARPT (annual residential property tax) to sit alongside the 15% Stamp Duty Land Tax (SDLT).
The announcement marks the end of a nine month wait for agents specialising in UK prime property who complained that uncertainty about the incoming charges was deterring overseas buyers.
Residential properties used for 'genuinely commercial activities', such as rental, will only be liable for the lower 7% SDLT announced in this year's Budget for 'ordinary' purchasers and will be exempt from the ARPT.
Mark Jamieson, of property consultants Strutt & Parker says, "This means foreign owners who only use their property for a few weeks a year may be tempted to let it out to qualify for lower stamp duty - which in turn could stimulate local business and the economy."
Stephanie McMahon, Head of Research at Strutt & Parker, has told OPP Connect, “There are still macro forces driving money towards London residential and through prime safe assets. London is still competitive from a tax perspective.”
“It will make people reconsider, particularly if they are buying in company structures. We are expecting people’s approaches will now change.”
"For property markets to function most effectively they require clarity and the impact of uncertainty since March 2012 has been tangible, although we must bear in mind both the Jubilee and the Olympics add additional stalling factors.
The taxation changes could raise large amounts for the government, in just four London boroughs it could raise £656million a year, says Strutt and Parker.
Stephanie McMahon adds, "With the changes that have taken place there is an opportunity for UK residents to gain better relative value to those purchasing in company structures or who have non-dom status. We anticipate a pickup in transactions next year, particularly in the £2million-plus market."