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  • Katherine Bullock

Running to keep up – Property Taxes – the shifting landscape of land tax

Unlike the properties which it regulates, the landscape of land tax is shifting constantly. These changes can usually be traced back to one of several motivating factors: preventing the tax avoidance; simplifying the tax system; and equalising the position of UK landowners, whether residents or non-resident. Whether those efforts have been successful or not is a topic for another time. Today, here is a whistle-stop tour of just some of the highlights of the last decade in the field of land tax.

"...a whistle-stop tour of just some of the highlights of the last decade..."

• 2012 - Additional Rate of SDLT The introduction of a new maximum rate for SDLT of 15% in 2012 for companies purchasing certain residential property more than doubled the previous highest rate of SDLT at that time for corporate buyers. Though its impact has been overshadowed by the rise in SDLT rates since, it remains a disincentive to enveloping residential property. Sadly, there is no incentive to help de-envelope.

• 2013 - ATED and ATED CGT A year after increased SDLT, another incentive to stop the wealthy holding high value homes through companies, partnerships or collective investment schemes: the Annual Tax on Enveloped Dwellings, and its associated CGT. This was a brand-new tax for owning residential properties, and extra CGT for selling them. Seven years on the ATED is tolerated by many but still tripping others up.

• 2015 - NRCGT Until 2015, the UK was almost unique in that non-UK residents paid no CGT on disposals of UK property in most cases. Although that position had already started to erode, 6 April 2015 saw a sea-change with new rules charging CGT on residential UK property held by non-residents. There was rebasing from April 2015 to soften the blow. The stated goal of these changes was to “improve fairness” by addressing the difference in treatment between UK residents and non-UK residents.

• 2016 - CT on UK land trades and the new Transfer of UK Land code New legislation introduced on 5 July 2016 represented another sally in the ongoing assault on UK land traded by non-UK residents without paying HMRC its due. As of then, and with a TAAR applying from 16 March 2016, anybody trading UK land, regardless of where they were based, would pay tax on the profits of that sale to HMRC. At the same time, the new Transfer of UK Land code was introduced to ensure that income was not sheltered as gains – this time not labelled as a tax avoidance provision.

• 2017 - IHT on UK residential property/ RNRB From 6 April 2017, IHT is charged on UK residential property held indirectly by non-domiciled individuals whether through an offshore trust or a company, bringing all UK residential property within the scope of IHT. The same year brought the introduction of the residence nil rate band with the intention of removing the value of most family homes from the charge to IHT. The calculations and particularly the down-sizing provisions have provided hours of entertainment ever since.

• 2019 - CGT on direct and indirect holdings in UK land Following up on the success of the NRCGT, the government expanded the CGT regime for non-UK residents from 6 April 2019 to include gains from direct or indirect disposals of all UK land. Whether an interest in UK land, or an interest in an entity which derives its value from an interest in UK land, CGT is now in play.

• 2020 - NRCLs pay CT On what was no doubt quickly becoming their least favourite day of the year, 6 April 2020, non-resident company landlords holding UK property were now required to pay corporation tax on income derived from those properties. Whereas previously they would have paid income tax, they are now within the corporation tax regime. Proving the knife cuts both ways, UK tax residents now also have to pay CGT within 30 days of completion of a disposal of residential land.

• 2021 - SDLT Surcharge And just in case you thought an end was in sight, the government has announced that in 2021, non-UK residents will be charged SDLT at a rate 2% higher than UK residents on purchases of freehold and leasehold properties, and on rents on the grant of a new lease.

The frequency of change, coming in almost every year and adding some new element of taxation to those previously unaffected, must speak to the value and stability of UK land as a high value asset for both taxman and taxpayer. Undoubtedly the changes will continue. It pays, however, to look back and remember that despite the pace of change, this race is a marathon and not a sprint.


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