UK property tax changes for foreigners buying via a company clarified
|Tuesday, 11 December 2012|
Amendments to the UK’s 2013 Finance Bill will mean that foreign buyers of luxury residential property who use an offshore company will have to pay more tax but not genuine commercial investors.
The UK Chancellor George Osborne announced in his March Budget that he intended to close an alleged £1 billion stamp duty loophole where some super rich foreigners avoided paying the levy by putting expensive homes in offshore companies.
Residential properties used for ‘genuinely commercial activities’ will be relieved from the 15% rate for corporate vehicles holding properties valued above £2 million, the goverment has confirmed.
It means that bona fide businesses such as developers, traders and for investors holding buy to let properties, will instead pay a more general 7% rate introduced at the same time for properties over £2 million.
The tax will amount to £15,000 on properties bought for between £2 million and £5 million; £35,000 for properties between £5 million and £10 million; £70,000 on properties between £10 million and £20 million and £140,000 on properties sold for more thatn £20 million.
The British Property Federation, which raised concerns at the time that the plan was announced, welcomed the changes. It said that the amendments show that it will not be applied indiscriminately across the UK market which could have had potentially disastrous consequences for commercial investment in residential property.
‘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,’ said Liz Peace, chief executive of the British Property Federation.
‘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,’ she explained.
‘It is, however, unfortunate the confusion has led to an investment hiatus due to the uncertainty. Because of the legislative procedure businesses looking to invest today will have to wait until next summer, or pay the additional 8%,’ she added.
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