Net widens in stamp duty clampdown

More property owners will be caught in the stamp duty land tax (SDLT) net after the Chancellor confirmed the limit would fall to just £500,000.

The Chancellor had already imposed the duty on all properties bought through a corporate envelope above £2m, but from midnight tonight this will fall to £500,000.

This means that practically every property in London bought for investment purposes through companies will fall into the 15% tax bracket.

Osborne said in his speech: “Many of these are empty properties held in corporate envelopes to avoid stamp duty”.

Legislation will be introduced in Finance Bill 2014 to reduce the current threshold at which the Annual Tax on Enveloped Dwellings (ATED) bites from £2m to £500,000 phased in over the next two years.

In our live panel session during the Budget speech, tax editor Rebecca Benneyworth reacted to the Chancellor’s stamp duty news:

“WOW!! Increase in ATED scope to £500,000…I hope HMRC have enough staff to deal with the new scope of ATED. That is a lot of property”.

A new band for ATED applying to properties worth more than £1m with an annual charge of £7,000 will apply from 1 April 2015, and an additional band, from 1 April 2016, will apply for residential properties worth more than £500,000 with an annual charge of £3,500.

Companies and other ‘envelopes’ within the new phased in ATED bands  will also be subject to CGT on sale of the properties held  at a rate of 28%  under legislation to be introduced in Finance Bill 2015.

Philip Alfandary, associate director at Menzies said the extension of the punitive 15% SDLT charges and the ATED to corporate-held properties worth more than £500,000 will affect more people than the “clutch of oligarchs with houses in Belgravia” it was originally intended to catch.

“Potentially, it could affect mass affluent retirees or people who are already non-domiciled and who wish to engage in legitimate estate planning in relation to UK property.

“It will also catch many property investors who have legitimately structured their finances. There is a massive element of retrospection as these structures are costly to break away from,” he said.

CIOT president Stephen Coleclough added: “These measures look like part of a move to raise a greater proportion of taxes from property. If so there should be wider discussion and consultation.”