Consultation on the introduction of an annual levy for £2m-plus properties bought through a corporate firm began following the March Budget. The Government has today confirmed the introduction of the Annual Residential Property Tax for corporate vehicles will continue as proposed but with carve-outs for properties used for genuine business purposes, affecting developers, traders and investors holding buy-to-let properties
A £15,000 annual will apply to properties in the £2m to £5m band, £35,000 for properties between £5m and £10m, £70,000 for between £10m and £20m and £140,000 for greater than £20m.
The amounts payable come into effect from next April. For next year only the amounts will be payable by 31 October as opposed to the end of the financial year.
The March Budget introduced a blanket 15 per cent stamp duty tax rate for residential properties purchased through a corporate structure. As with the annual levy, the Government says exemptions will apply to properties purchased for genuine business purposes.
Exempted parties will instead be subject to the standard residential stamp duty rate of 7 per cent.
A company will have to prove the property has been used for genuinely commercial purposes within three years or become subject to a claw-back regulation which requires full payment on the rate.
London Central Portfolio chief executive Naomi Heaton says; “With no ‘new’ property taxes announced during the Autumn Statement and the carve outs from the Finance Bill, the Government have clearly recognised that their previous blanket legislation not only failed to register any increased taxes, but failed to recognise the knock-on effect for the UK economy.
“They should be applauded for this considered decision and the recognition of the genuinely commercial contribution of residential investment and the private rented sector. Hopefully, they have learned from their mistakes, and will not apply any more knee-jerk or ill thought-out measures, which may be populist but not prudent, without prior consultation and thorough research.”
British Property Federation chief executive Liz Peace says: “Foreign buyers of luxury residential property for their own enjoyment were always the intended target of the stamp duty changes; it was never designed to deliberately clobber commercial investment in UK housing.
“The devil will be in the detail, but it appears ministers have listened and sensibly decided to make technical changes that ensure the scope of the measure is not wider than it needs to be.
“It is, however, unfortunate the confusion has led to an investment hiatus due to the uncertainty. Because of the legislative procedure businesses looking to invest today will have to wait until next summer, or pay the additional 8 per cent.”