Property industry response to Finance Bill 2013

Monday 24th December 2012

In the Finance Bill 2013, published on 11 December, the government ensured that foreign nationals buying luxury property in the UK will pay their fair share of tax through a range of new property taxes.

The new annual levy for non doms will be charged on residential properties worth in excess of £2m, while there was an extension to capital gains tax, charged at 28 per cent, for non-residential non natural persons disposing of interests in UK residential property valued at over £2m.

The annual tax will be charged at the following rate:

+ £15,000 (between £2m and £5m)

+ £35,000 (£5m-£10m)

+ £70,000 (£10m-£20m)

+ £140,000 (£20m+)

The annual levy, which will now be referred to as the Annual Residential Property Tax (ARPT) for corporate vehicles, will continue as proposed. But exemptions will continue to apply for bona fide businesses so that APRT and stamp duty land tax (SDLT) measures go hand in hand. The amounts payable come into effect on the 1st April 2013.

Property industry reply to the Finance Bill 2013:

Stephanie McMahon, head of research at Strutt & Parker, said: “For property markets to function most effectively they require clarity and the impact of uncertainty since March 2012 has been tangible, although we must bear in mind both the Jubilee and the Olympics add additional stalling factors. We now know that the taxation changes for "non-naturals" buying and owning property in the UK and the size of the potential tax haul is not insubstantial: our analysis of just four London boroughs puts the potential annual levy haul at £656m.

“With the changes that have taken place there is an opportunity for UK residents to gain better relative value to those purchasing in company structures or who have non-dom status. We anticipate a pickup in transactions next year, particularly in the £2m plus market.”

Peter Wetherell, director of Wetherell estate agency in Mayfair, said: “Since revisions to the corporate ownership of property were announced but not outlined in detail this year, many prospective buyers of prime central London properties have been deterred by the uncertainty surrounding costs of ownership, which cast a long shadow over the market. This was particularly evident in Mayfair, where a high proportion buyers purchase properties through corporate structures. This is however not to be confused with stamp duty which 97% of purchasers paid.

“The details announced [in the Finance Bill], while not overly encouraging to corporate owners of high value properties, at least provides guidance on what the government is planning. This may help unlock some of the buyers who have been on hold. The government is quite plainly indicating that private ownership of properties over £2m with a 7% stamp duty levy is the preferred route for overseas buyers, but this also comes with knock on implications regarding capital gains and inheritance."

Ed Mead, Director at Douglas & Gordon, said: “It seems CGT will accrue on gains post April 2013 so those seeking to go for a NNP property ownership and pay the enhanced SDLY and annual Levy whilst thinking they'd rather take the capital gain must think again. For that reason all this simply distils down to who is and isn't exempt, if there's a suitable onshore vehicle that's exempt from paying the Levies that satisfies anonymity requirements then perhaps that will be the only loophole left for those seeking one.

“We've seen purchases for those not buying in the own name down c. 80% since the Budget in March so it'll be interesting to see if that blockage releases or whether we'll continue to see detrimental decline. We'll have to wait for Q3 2013 to find out via the land registry.”

Robert Bartlett, CEO of Chesterton Humberts, said: “Thankfully, the Draft Finance Bill 2013 announced by the Chancellor contains no nasty surprises: as promised in the Autumn Statement last week, apart from the measures already outlined in the 2012 Budget, there are no new property taxes being introduced. The one thing it has done is remove the uncertainty that has been constricting the market since the Budget announcement back in March and this will hopefully inject some vitality into the market.”

Peter Mackie, managing partner at Property Vision buying agents, said: “As a result of the increased SDLT and the annual property tax announced in the Budget earlier this year, we have already seen some signs of international demand decreasing, particularly from nationalities unwilling own a property overseas unless it is through a company. The ambiguity of the annual tax caused a number of buyers at the top-end to put their property purchase on hold until further details were announced.

“The legislation announced in the Finance Bill, will reassure a number of prime buyers who have been hesitant to commit to a sale. Although it will be an added cost for buyers purchasing through a corporate structure, it is unlikely to discourage buyers at the top-end who still view London as a ‘safe haven’. However there will be more supply as people unravel structures which they have held for a long time.”

Liz Peace, Chief Executive of the British Property Federation, remarked: “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."

Naomi Heaton, CEO of London Central Portfolio Ltd, fund and asset managers, specialising in prime central London, said: “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.”

Richard Barber, partner at Prime Central London estate agency, W.A. Ellis, commented: “Landlords will be breathing a sigh of relief that the introduction of the CGT liability for properties above £2m owned by 'non-natural persons' is applicable from April 2013 and not retrospective. Since the March 2012 Budget, the main factor fuelling some of our clients desire to put their properties on the sales market was that they faced a CGT liability from the date of purchase, which for those who've owned property for 15-20 years, would have been very significant.

“The annual residential property taxes are not too draconian; however, they will affect rental yields by as much as 0.75%.”


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