News › Weekly Alert Article
Tax Policy Update for Real Estate Sector
With the UK government's 2012 budget announcements in the rear view mirror, it is time to look at the progress of measures released last March. These actions were designed to ensure that individuals and companies pay their fair share of tax on residential property transactions and to tackle perceived avoidance. Taxand UK provides an update on recent developments and considers what's ahead in the coming months.
The Government announced a consultation on a package of measures in Budget 2012, ostensibly to ensure that individuals and companies pay a fair share of tax on residential property transactions and to tackle perceived avoidance, including the wrapping of property in corporate and other "envelopes." The consultation focused on two specific areas:
- An annual charge on residential properties valued over ?2 million owned by certain "non-natural" persons (e.g., companies, partnerships including companies and collective investment vehicles)
- The extension of the Capital Gains Tax (CGT) to the disposal by certain non-resident non-natural persons of residential property, interests in such property or the envelopes in which they are held.
The consultation closed on 23 August and a response is expected from the Government some time this Fall. It is fair to say that the proposals were not met with much enthusiasm by the real estate community and this will doubtless be reflected in the responses of taxpayers, their advisors and other professional bodies in their responses to the consultation document.
The consultation process still seems to be working as HMRC is clearly taking into account the views of taxpayers and professional bodies in the process of developing policy in the real estate arena. Whilst it is expected that the industry will come through key consultations on the taxation of residential property and the taxation of interest income relatively unscathed, there may be further proposals to come. All eyes will be on the draft Finance Bill due on 11 December 2012.