Annual Residential Property Tax (ARPT) – United Kingdom (UK)
The Treasury yesterday released the draft Finance Bill 2013 clauses in relation to the new annual charge, which will be called the “Annual Residential Property Tax” (ARPT). Details of the extension to CGT from April 2013 also emerged, although we will have to wait until January 2013 before the draft legislation is released. These follow the announcements in the 2012 Budget affecting the acquisition and ownership of high value (greater than £2m) UK residential property by “non natural persons” and a consultation in Summer 2012.
The proposals outlined in the consultation document extended considerably further than to an owner’s own home and potentially impacted upon genuine property investment and development operations carried out through, for example, overseas companies. We are pleased to report that the Government have been receptive to the responses to the consultation and has introduced a series of reliefs from ARPT in the draft legislation which will exclude genuine businesses carrying out genuine commercial activity from the charge, including property development, rental and trading businesses. The reliefs will also be mirrored for the 15% rate of SDLT (which was introduced from 21 March 2012) from the date of Royal Assent of the Finance Bill 2013.
Most notably, as well as extending reliefs to property investors, the two year requirement for property developers has been dropped. However, note that the two year developer requirement in relation to the 15% rate of SDLT will still be in force until the Royal Assent of the Finance Bill 2013 (which normally occurs around July). In addition, a “clawback” will be introduced in relation to the 15% rate of SDLT such that if circumstances change within the following three years and it would have been due, additional SDLT will be payable.
There is also good news on the extension of the CGT charge to certain disposals of residential property valued at over £2m which will apply from 6 April 2013. The charge was expected to be extended to any overseas entity that is not an individual including trustees and therefore would have applied more widely than the ARPT/15% SDLT. However, it has been announced that it will only be payable by the same non-natural persons which are liable to the ARPT. This means that Luxembourg companies holding commercially let residential property should not be subject to UK tax on any capital gain on sale.
Furthermore, the CGT charge was expected to apply to the total gain accruing on a disposal of a property. The overview published yesterday states that the charge will only apply to gains accruing on or after 6 April 2013 meaning that the tax will not apply retrospectively as previously feared.
Nicholas Martin Director Coficom Trust S.à r.l. http://www.coficom.lu Tel. office: +352 26 80 46 96 Tel. mobile: +352 691 333 875 Fax: +352 26 80 46 97