Thursday, 24 April 2014

Changes afoot for owners of UK residences

The Government recently issued a consultation entitled ‘Implementing a capital gains tax (CGT) charge on non-residents’. Now, if you are UK resident for CGT purposes, you might have formed the view, quite reasonably, that, in view of its title, you need not add the consultation to your pile of bedtime reading. Tut tut, how could you be so silly?!

Buried deep within the consultation is a proposal which could also affect UK residents owning two or more residences. More on that below. First, here’s a quick summary of the main proposals in the consultation:
  • The Government is proposing that CGT should be extended to non residents disposing of UK residential property, starting in UK tax year 2015/2016. It is not yet clear whether the changes will apply only to gains accruing post April 2015.
  • Non resident individuals, including those owning jointly or in partnership with others, and non resident companies and trustees will be affected. The precise details of how the new CGT extension to non resident companies will mesh with their existing obligations under the Annual Tax on Enveloped Dwellings (ATED) regime are yet to be worked out.
  • Unlike ATED, there will be no minimum threshold of property value to which these changes will apply.
  • The key criterion is whether the property is used, or suitable for use, as a dwelling or residence. It need not be the owner’s main residence though. Buy-to-lets and second homes are also caught. In notable contrast to ATED, where there is relief for property rental businesses, there will be no relief for buy-to-lets. 
  • The rate of tax for individuals will be 28%. The rate for others has not been announced.
  • The tax will be collected through a combination of a withholding mechanism and self-reporting option, the former operated by professionals such as solicitors or accountants.

Thursday, 10 April 2014

ATED goes large

ATED (the UK’s Annual Tax on Enveloped Dwellings) is one of the newest taxes to hit the statute book but it became clear in this year’s Budget that, as taxes go, it is destined for even greater things in 2015 and beyond.

ATED is an annual tax, levied on non natural persons (such as companies) owning UK residential property.  Assuming one of the ATED reliefs is not available, the amount of ATED payable per annum depends upon the value of the property at the last valuation point (currently 1 April 2012) and the annual chargeable amount (ACA) for the particular ATED tax year, as the ACAs increase with the UK’s Consumer Price Index each year.