STAMP AND PROPERTY TAXES

Stamp Duty Land Tax Charities Relief

Following a recent court decision, legislation will be included in Finance Act 2014 to clarify how the SDLT charities relief applies where a charity purchases UK land jointly with another purchaser who is not a charity. Provided that the charity intends to hold its share of the land for charitable purposes, the relief available to the charity will be based on the lower of the proportion of the chargeable consideration paid by the charity, or any person connected with it, and the proportion of the chargeable interest in the land held by the charity. SDLT will be chargeable on the non-charity purchaser at the rate applicable to the total consideration paid for the property. The legislation will apply to transactions with an effective date on or after Royal Assent.

Taxation of High Value Residential Property

Finance Act 2014 will include legislation intended to ensure that companies, partnerships and collective investment schemes which own UK residential property valued at £500,000 or more, which is not used for a commercial purpose, will be required to pay an appropriate amount of tax. The threshold for the 15% rate of stamp duty land tax will be reduced from £2m to £500,000 for transactions where the effective date (normally the date of completion) is on or after 20 March 2014. Transitional provisions will ensure that in most cases the existing threshold will continue to apply in respect of contracts entered into before 20 March 2014 but completed on or after that date.

The annual tax on enveloped dwellings (ATED), introduced by Finance Act 2013, will be extended to include dwellings valued at more than £1m with effect from 1 April 2015, and to include dwellings valued at more than £500,000 with effect from 1 April 2016. In addition, Finance Act 2015 will provide that all companies, partnerships and collective investment schemes affected by the new ATED bands will also be subject to capital gains tax at a rate of 28% on the disposal of the properties held. This will take effect from the same dates (1 April 2015 and 1 April 2016) as the extension of the ATED bands.