December 14, 2012 6:43 pm

New taxes for luxury homes

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This 11-bedroom baronial mansion near the village of Aberlour is on the market for £1.39m©Corbis

This 11-bedroom baronial mansion near the village of Aberlour is on the market for £1.39m

Owners of luxury homes that are held in a company vehicle will have to pay annual charges of up to £140,000 and capital gains tax (CGT) from next April – but the new rules offer some important concessions, experts say.

On Tuesday, the Treasury laid out new legislation in its finance bill confirming the introduction of a new so-called annual residential property tax (ARPT) for “non-natural persons” – meaning corporate vehicles – owning homes worth £2m and over.

The charge starts at £15,000 for properties worth £2m up to £5m, increasing to £140,000 for homes valued over £20m. The levy will rise in line with inflation, with the value of the property to be reassessed every five years.

Homeowners will have to submit their own valuation to HMRC, although the Revenue will introduce a service to confirm the value of properties that are within 10 per cent of the thresholds. The first return will be due on October 1 2013, with payment by October 31, 2013, and the normal date for ARPT returns will be April 30.

Capital gains tax (CGT) will be extended to non-resident “non-natural persons” when they sell properties worth over £2m from next April. It will be levied at 28 per cent and there will be taper relief for homes close to the £2m threshold.

Property shake-up

Stamp Duty Land Tax rates by purchase price

Up to £125,0000 – Nil
£125,000 to £250,000 – 1%
£250,000 to £500,000 – 3%
£500,000 to £1m – 4%
Over £1m to £2m – 5%
Over £2m – 7%
Over £2m (purchased by certain non-natural persons) – 15%

Exemptions from annual residential property tax

Property development businesses

Property rental businesses (i.e landlords)

Properties used for business purposes and open to the public as a venue

Properties held by charities


Certain diplomatic or publicly owned properties

Properties that provide employee accommodation

Annual residential property tax charges (2013-14) by value of property

£2m to £5m – £15,000
£5m to £10m – £35,000
£10m to £20m – £70,000
Over £20m – £140,000

However, the Treasury offered homeowners some concessions. It confirmed that CGT will only be charged on the gains arising after April 6 2013, rather than all gains made since the property was bought via the company vehicle.

“This marks significant progress from the consultation document, which implied that the tax could be charged on all gains from the date the property was initially acquired by the company,” said Gráinne Gilmore, head of UK residential research at Knight Frank, the estate agent.

Landlords and other commercial businesses, such as landed estates, farmers and charities, will be exempt from the ARPT (see box), although they will still need to submit a return to claim the relief.

“Following the consultation, these measures have been simplified and targeted in a number of ways,” said Christopher Groves, partner at law firm Withers.

Paul Emery, real estate tax director at PwC, noted that the annual charge has been set at an “affordable” level.

“This mansion tax has been designed with a clear expectation that some will opt for the status quo and simply take the tax on the chin,” he explained.

The Treasury will publish draft legislation on extending CGT to non-resident non-natural persons early next year. This will consider extending the tax to cover properties held by UK companies as well as offshore companies.

“Whilst these apparent simplifications and relaxations are welcome, the detail of the draft legislation due in January will be vital, and there will be very little time for those affected to digest this and decide on appropriate structures before the legislation comes into force in April,” said Patricia Mock, tax director at Deloitte.

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