The ownership of UK Property by non-uk resident investors The ghosts of investment past, present and

Transcription

1 The ownership of UK Property by non-uk resident investors The ghosts of investment past, present and

2 Who are ESRG Taxation? We are a firm of Chartered Tax Advisers (CTAs) and Trust & Estate Practitioners (TEPs). As such, we advise: entrepreneurs; businesses; high net worth individuals; Sportspersons; and entertainers on how to structure their affairs to meet their personal and commercial objectives in the most tax efficient manner.

3 Who is Andy Wood? Andy has spent his career working in the Big 4 and latterly as a senior member of another large international accountancy firm. He is a: Chartered Tax Adviser; and Member of STEP; He has a great deal of experience in advising Entrepreneurial clients, with a particular interest where there is an international angle to their affairs.

4 Agenda Setting the scene; Stamp Duty Land Tax (SDLT); Annual Tax on Enveloped Dwellings (ATED); Capital Gains Tax (CGT) rules; Inheritance Tax (IHT); Council tax v Mansion Tax?

5 "A long time ago [2011] in a galaxy far, far away [UK] (Star Wars, Episode IV: A new hope) All seemed so simple back in 2011; No special SDLT regime; Basic CGT rules apply if non-uk resident then no CGT charge (though subject to anti-avoidance provisions); No annual wealth tax of any description; Inheritance Tax (IHT) on UK situs assets

6 Ghost of investment past: Non-resident investors Non-UK Co UK

7 It was the best of times, it was the worst of times (Charles Dickens, Tale of Two Cities) You can use the most up-to-date and comprehensive measure of living standards which is real household disposable income (RHDI) per capita On that measure standards will be higher in 2015 than in George Osborne, UK Chancellor, 18/3/15 a new measure to pretend that what people feel in their wallets and their pockets simply isn t true. Ed Balls, Shadow Chancellor, 18/3/15

8 Hissing geese? "The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least possible amount of hissing. (Jean-Baptiste Colbert ) Wealthy non-uk residents / non-domiciled individuals to pay their fair share of tax Capital rich (mainly London) property owners to pay their fair share of tax

9 The ghost of investment present Timeline: 22/3/2012: SDLT special rate of 15% for purchases of high value residential interests by Companies; 1/4/2013: Annual Tax on Enveloped Dwellings (ATED) introduced. Wealth tax on similar high value homes; Announced that ATED to attach less valuable properties 4/12/14: major changes to SDLT rates high value homes hit much harder by the tax 6/4/2015: Scotland to levy own stamp tax called LBTT 6/4/2015: CGT extended to non-uk resident persons for certain residential property

10 Stamp Duty Land Tax (SDLT): a blunt instrument (1) From 22 nd April 2012, increased to 7% for residential properties costing over 2 million; Where the same property acquired by a Non-Natural Person (NNP)= 15%; What is a NNP? A vehicle Includes: Company, collective investment scheme (eg UT), partnership Excludes: Trustees (even if corporate) Location irrelevant (UK / Overseas)

11 Stamp Duty Land Tax (SDLT): a blunt instrument (2) Exceptions Should be noted that the purpose of the rules was to stop high value homes being enveloped Therefore, there are exclusions for: Property developers who meet the qualifying conditions; Property rental businesses; Where property is acquired to be used within certain trading businesses; Others apply

12 Stamp Duty Land Tax (SDLT): a blunt instrument (3) 2m reduced to 500k from 20 March 2014 On 4 December - things changed again! Old slab system replaced with progressive system and rates revised Broadly: Properties below 925k pay less SDLT Those above pay more Very valuable properties pay much more Still a 15% rate for corporates over 500k

13 The Annual Tax on Enveloped Dwellings (ATED) (1) Applies wef 1/4/2013 Again, applies to properties held by NNPs ( enveloped ) A key word is dwellings applies to properties used as owner s home rather than other types of residential An annual wealth tax on the value of a property Set initially at properties valued at over 2m

14 The Annual Tax on Enveloped Dwellings (ATED) (2) ATED seen as a success even after a short period of time; Therefore, announced the threshold would: Be cut in half from 6 April 2015 = 1m Cut in half again from 6 April 2016 = 500k How many properties in London aren t worth 500k?! Example of the Hissing Goose? Money for old rope? Important: Applies to ENVELOPED properties only Applies to HOMES only important exclusions

15 The Annual Tax on Enveloped Dwellings (ATED) (3) Property value 500,000-1m ATED 2013/14 ATED 2014/15 ATED 2015/16 ATED 2016/16 n/a n/a n/a 3.5k 1m - 2m n/a n/a 7k 7k + CPI 2m - 5m 15k 15k 15k + CPI 15k + CPI 5m - 10m 35k 35k 35k + CPI 35k + CPI 10m - 20m 70k 70k 70k + CPI 70k + CPI 20m+ 140k 140k 140k + CPI 140k + CPI

16 The Annual Tax on Enveloped Dwellings (ATED) (4) Reliefs (must be claimed) from ATED: held by property development companies Dwellings held by property rental businesses where the building is let out to a third party on a commercial basis. Farmhouses occupied by working farmers. held by trading companies for the use of employees in the trade. owned by a charity and held for charitable purposes.

17 Extension of CGT charges to certain disposals by nonresident persons (1) Historic position UK residents: Sale will result in a gain Individual may get main residence relief? Non-residents: Unlike most other countries, UK has generally offered tax-free gains An issue of fairness?

18 Extension of CGT charges to certain disposals by nonresident persons (2) A targeted fairness! Originally just applying to gains which were within ATED regime (so high value, NNPs etc) From 6 April 2015: Extended outside of ATED will apply to any non resident (including individuals) selling residential property Only applies to gains (not just sales) ARISING post 6 April 2015

19 Extension of CGT charges to certain disposals by nonresident persons (3) What is Residential property? Definition: already available as a dwelling, or could be used as a dwelling, and anything that is going to be constructed for use as a dwelling (so includes off plan ) Value is irrelevant so differs from ATED No reliefs - so differs from ATED

20 Extension of CGT charges to certain disposals by nonresident persons (4) Interaction with ATED-related CGT charge Several differences If both apply then ATED-related CGT charge prevails Automatic rebasing by dint of charge on post April accrued gains only however, recommend a valuation Rate of tax: Individuals and Trustees: 18% / 28% Companies: 20%

21 Extension of CGT charges to certain disposals by nonresident persons (5) Principal private residence relief (PRR) Non-res individual can claim if pass new occupancy test (90 days) Diversely held / market funds / life assurance funds: There is an exemption from the rules for these types of structure They offer a planning route Reporting

22 Inheritance Tax (IHT) Remember, a non-resident and non-dom individual still will be subject to UK IHT on UK assets; Previously use of non-uk Company but now: SDLT super tax relief if business ATED relief if business Personal name? If buy to let plenty of options If personal - Careful structuring of debts?

23 Council Tax v Mansion Tax? The ghost of investment future? A matter of politics? A matter of semantics? Seems like more feather plucking

24 Holding property going forward No one size solution objectives? Investment return? Look to corporate ownership: Tax on CGs at 20% ATED relief SDLT super tax relief IHT if non-uk co then not in UK estate Funds? Personal use? Look at personal ownership: CGT at 28% - Main residence relief? No ATED as not enveloped SDLT prevailing rate IHT careful use of debts / charges?

25 Any questions?

26 Contacts ESRG Taxation Regus House Herons Way Chester Business Park Chester CH4 9QR Telephone: +44 (0)

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