These changes will apply an annual mansion tax on such properties (of up to 0.7% per annum) and also a charge to capital gains tax (at 28%) on sale of the property
Draft clauses for the Finance Bill were today published by the Treasury, clarifying a number of tax changes and introducing a mansion tax. Christopher Groves, partner in the wealth planning team at international law firm Withers, argues that the benefits of the Coalition’s New Approach to Tax Policy Making announced in 2010 are manifest in this.
Christopher Groves comments:
“A great deal of uncertainty had been caused by the announcement in March of wide ranging tax changes that would apply to companies, partnerships, investments funds and trusts that own residential properties worth more than £2m. These changes will apply an annual mansion tax on such properties (of up to 0.7% per annum) and also a charge to capital gains tax (at 28%) on sale of the property.
“Following the consultation, these measures have been simplified and targeted in a number of ways. In particular, genuine residential landlords, businesses and property developers will be excluded from the application of the charges. Properties held by settlements will also be completely excluded from the charges. Finally, properties subject to the new charge will be rebased to their value in April 2013, so that any gain that accrued before the rules take effect will not be taxed.
“These changes are sensible and reflect the spirit of co-operation between the Treasury, HMRC and taxpayers in the preparation of new tax legislation. The result is a more certain and better targeted tax regime that will allow genuine businesses to escape unnecessary tax and compliance burdens and individual taxpayers to continue appropriately structuring their affairs, while preserving revenue for the government.”