KPMG’s Private Client Update
UK high value residential property – should you act now?
November 2012
The timing of key events in the process
of change to the taxation of UK high value
residential property (worth over £2m) has
made it difficult for decisive action to be
taken. This timeline perhaps explains why:
• The 7% SDLT charge (a new top rate for individuals) came
into force on Budget Day, 21 March 2012.
• The 15% SDLT charge (a new rate for non-natural persons
which broadly means companies, partnerships with a
corporate member and collective investment vehicles) also
came into force on 21 March 2012.
• A consultation document was published by HM Treasury on
31 May 2012 which invited comments on a proposed annual
charge on properties owned by non-natural persons; and the
proposed extension of CGT on disposals of properties by a
non-resident, non-natural person. The proposals also intend
to tax the disposal of shares or securities in a company
holding such property by a non-resident person.
• The consultation period closed on 23 August 2012.
• A summary of the responses to the consultation, and draft
legislation, will be published on 11 December.
• The annual charge and CGT charge, if implemented in any
form, are expected to come into effect on 6 April 2013.
• However, the Finance Bill in which the changes will be
contained, will not be enacted until around July 2013 and
may therefore change in the meantime as it progresses
through Parliament.
What should I do?
This really depends on what was the motive for the current
ownership structure of the property and whether that motive is
still valid.
For example, a property may be currently owned by a
non-UK resident company for IHT reasons or for anonymity
reasons. A non-domiciled owner may decide it is worth paying
the annual charge and CGT upon disposal to protect their IHT
position or protect their anonymity. The names of property
owners are publicly available through HM Land Registry.
Where high value residential property (both rental and owner
occupied) is held in an existing structure, the fiduciary provider
and the beneficial owner need to consider:
• Is the structure still fit for purpose?
• What is the primary motive for continuing to use
the structure?
• Is the property intended to be a long term investment
or could it be sold in the short to medium term?
• Is the property currently standing at a capital gain and
can that capital gain be quantified?
• If there is no primary motive to continue to use the
structure, should one ‘unwind it’ and, if so, what would
be the tax exposure?
• If there is a primary motive to continue with the structure,
what would the tax exposure be going forward?
For anyone looking to acquire high value residential property
now, please click on this link for information on how a new
acquisition might be structured.
When should I do it?
We would recommend preparation commences immediately.
There will be a short timescale if the draft legislation is
released as expected on 11 December, and new measures
come into force on 6 April 2013. Indeed the timing of Easter
compresses the timescale even further. Furthermore in our
experience between 6 and 12 weeks is required in many
offshore jurisdictions to liquidate companies (which may be
the appropriate course of action in some cases). So what could
be done in the meantime? These are a few actions but not an
exhaustive list:
• Engage the services of a suitable tax adviser
• Quantify the potential tax exposure
• Involve banks if finance arrangements are in place or are
not in place but may be needed
• Engage lawyers if a change of ownership structure is
a possibility
What can be done?
Please contact us if you are a trustee/director of a structure that
owns high value UK residential property or you are a beneficiary
of such a structure. Properly understanding the motive for
creating the structure and the plans for the future property
ownership will enable us to provide the best advice.
Although how the new legislation from 6 April 2013 will work
is unknown, understanding the aims and requirements of the
Non-Dom are key to providing the best possible structure.
Ensuring flexibility, should the ultimate legislation veer away
from the consultation document or the draft legislation due
out on 11 December, will be a significant and challenging
requirement that will need to be factored into any advice.
The fallback position in such circumstances must therefore be
to try and ensure that even if the structure does not, ultimately,
afford the hoped for benefits over direct ownership, that it does
not make the position worse.
• Engage offshore fiduciary service providers if old structures
are likely to be affected or new ones may be required.
This would mean investing some time and cost now. Whilst
there is a possibility that some of this time and cost could be
wasted if the contents of the final legislation are different from
the proposals currently on the table, the risk and associated
cost of doing nothing now and then running out of time to
implement changes ahead of 6 April 2013 must be assessed.
Contact us:
David Kilshaw
Partner – London
Mike Walker
Partner – London
Dermot Callinan
Partner – Leeds
Paul Spicer
Partner – Bristol
T: +44 (0)207 311 2841
E: [email protected]
T: +44 (0) 207 311 8620
E: [email protected]
T: +44 (0) 113 231 3358
E: [email protected]
T: +44 (0) 117 905 4040
E: [email protected]
Greg Limb
Partner – London
Daniel Crowther
Director – London
Beatrice Friar
Director – Glasgow
Peter Saunders
Director – Midlands
T: +44 (0)207 694 5401
E: [email protected]
T: +44 (0) 207 694 5971
E: [email protected]
T: +44 (0) 141 300 5768
E: [email protected]
T: +44 (0)115 936 3661
E: [email protected]
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