Private Client Update - UK Residential Property

Private Client Update
UK Residential
Property
April 2014
kpmg.co.uk
The taxation of high value UK residential property has seen significant changes in recent years. The
2014 Budget announced the extension of anti-avoidance tax charges to lower value properties, which
will bring a greater number of properties within the scope of these rules.
Furthermore, the Government is currently consulting on the introduction of a UK CGT charge for nonUK residents disposing of UK residential property from April 2015.
.
Annual Tax on Enveloped Dwellings (ATED)
Since 1 April 2013, the ATED has been charged where a Non
Natural Person (NNP) (a company – including both UK and non
UK companies, a partnership with a corporate partner or a
collective investment scheme) owns a UK residential property
valued at more than £2 million. The 2014 Budget announced
that the ATED will be extended to properties valued above
£1 million from 1 April 2015 (£7,000 per annum) and to
properties valued above £500,000 from 1 April 2016
(£3,500 per annum).
Where a return has been filed, any overpaid tax can be
recovered by submitting an amended return by 30 April 2015.
Period 2: 1 April 2014 – 31 March 2015
The deadline for filing an ATED return for Period 2 is 30 April
2014. If the NNP was not within the charge to the ATED on 1
April 2014 (for example the property had not been purchased
by that date), the deadline for filing the ATED return is 30 days
of the NNP becoming within the charge to the ATED.
ATED charges
The existing reliefs for certain property businesses will still
apply and it will remain necessary to file an ATED return with
HM Revenue & Customs (HMRC) for each chargeable period
that a qualifying property is held. Even if a claim can be made
for relief to reduce the ATED to nil by qualifying for one of the
few exemptions, the return (which requires an assessment of
the value of the property) must still be submitted.
The ATED charge increases each year in line with inflation (CPI).
The charges for the first and second chargeable periods are:
Reminder of filing deadlines
£2 million to £5 million
Period 1: 1 April 2013 – 31 March 2014
The deadline for filing an ATED return for Period 1 was
1 October 2013. The ATED charge was payable by
31 October 2013.
There will be a requirement to file a further ATED return if
additional tax has become chargeable for that period
(e.g. because of a change in the use of a property):

If no relief from the ATED charge was claimed, the filing
deadline is 30 April 2014.

If relief from the ATED charge was claimed, the filing
deadline is 30 days from the event that triggered the
additional tax charge.
ATED charges
Value of UK residential
property
Tax charge for the
Tax charge for
period ended the period ended
31 March 2015
31 March 2014
£15,000
£15,400
£5 million to £10 million
£35,000
£35,900
£10 million to £20 million
£70,0000
£71,850
Over £20 million
£140,000
£143,750
Stamp Duty Land Tax (SDLT)
Since 22 March 2012, SDLT at 15% has been charged where a
NNP acquires a UK residential property worth over £2 million.
The 2014 Budget announced an extension to the 15% rate
from 20 March 2014 where the purchase price exceeds
£500,000. Like ATED, certain businesses can claim an
exclusion from the 15% SDLT rate in the relevant land
transaction return submitted to HMRC.
© 2014 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative, a Swiss entity. All rights reserved. Printed in the United Kingdom.
Capital Gains Tax (CGT)
ATED-related CGT
Since 6 April 2013, NNPs in the ATED disposing of UK
residential property worth over £2 million have been liable to
CGT at 28% on the gain accrued since that date. The 2014
Budget announced that the minimum threshold will reduce to
£1,000,000 from 6 April 2015 and to £500,000 from 6 April
2016. Like ATED, certain businesses can claim an exemption
from ATED-related CGT.
HMRC must be notified of ATED-related capital gains by 5
October following the end of the tax year in which the disposal
was made and an ATED-related CGT return must be filed with
HMRC and the CGT paid by 31 January following the end of
that tax year. Penalties will apply for late filing and late
payment.
Extension of CGT to non-UK residents
The Government is currently consulting on the extension of
CGT to gains arising from April 2015 to non-UK residents
disposing of UK residential property. The aim of the proposals
is to ensure both UK and non-UK residents are subject to a
comparable rate of tax on such gains.
The rate of the extended CGT charge has not yet been
announced. Nor has the method of collecting the tax.
However, the Government’s preference is to introduce a
withholding tax (operated by lawyers, estate agents and
accountants) which operates alongside the alternative option of
self-assessing the tax liability.
The proposed rules will exist alongside the ATED-related CGT
rules and there are fundamental differences between these
two CGT charges:

The extended CGT charge will not be restricted to NNPs. It
will apply to all residential property regardless of value; and
it will affect a wider range of non-UK residents including
individuals and potentially non-UK resident trusts and
partners.

There will be no minimum value threshold.

Gains on UK residential property used as an investment
(including rental businesses) will be taxed subject to
exemptions for UK and foreign REITs and certain other
types of funds.
The consultation also includes proposals to change Principal
Private Residence (PPR) relief (which currently exempts
individuals from CGT on the disposal of their main residence) if
more than one residence is owned. The consultation proposes
the removal of the ability for taxpayers to elect which
residence is their main residence. This would be replaced by
the determination of main residence based on the balance of
various factors or the introduction of a definitive test. A further
proposal could make PPR relief available to non-UK residents
in certain circumstances.
If you have any queries or would like further advice, please speak to your usual KPMG contact, or one of the people below:
LONDON
SOUTH
MIDLANDS
Jo Bateson
Director – London
T: +44 (0)20 7694 5445
E: [email protected]
Jane Crotty
Director – Bristol
T: +44 (0)117 905 4143
E: [email protected]
Susan Kingsbury
Director – Birmingham
T: +44 (0)121 232 3419
E: [email protected]
Daniel Crowther
Partner – London
T: +44 (0)20 7694 5971
E: [email protected]
David Furness
Director – Reading
T: +44 (0)118 964 2192
E: [email protected]
Narinder Paul
Partner – Birmingham
T: +44 (0)121 232 3357
E: [email protected]
Greg Limb
Partner – London
T: +44 (0)20 7694 5401
E: [email protected]
Roger Gadd
Director – Bristol
T: +44 (0)117 905 4636
E: [email protected]
NORTH
Derek Scott
Associate Partner – London
T: +44 (0)20 7311 2618
E: [email protected]
Simon Johnson
Director – Bristol
T: +44 (0)117 905 4601
E: [email protected]
Mike Walker
Partner – London
T: +44 (0)20 7311 8620
E: [email protected]
Paul Spicer
Partner – Bristol
T: +44 (0)117 905 4040
E: [email protected]
Stamp Taxes
Sean Randall
Associate Partner – London
T: +44 (0)20 7694 4318
E: [email protected]
Dermot Callinan
Partner – UK Head of Private Client
T: +44 (0)113 231 3358
E: [email protected]
Nick Pheasey
Partner – Manchester
T: +44 (0)161 838 8327
E: [email protected]
Jonathan Turner
Director – Leeds
T: +44 (0)113 231 3385
E: [email protected]
SCOTLAND
Beatrice Friar
Director – Glasgow
T: +44 (0)141 300 5768
E: [email protected]
www.kpmg.co.uk
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© 2014 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative, a Swiss entity. All rights reserved. Printed in the United Kingdom.
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