Fionnuala Lynch, tax partner at Hamlins LLP, comments on the property headlines in this week’s autumn statement.
The chancellor delivered his autumn statement and spending review to Parliament on 25 November. In my view, Mr Osborne is clearly pandering to public opinion with his U-turn on the proposed tax credit changes; the introduction of several measures to dampen the housing market and increase the tax yield is also likely to be popular with the electorate. Below, I summarise the main real estate tax measures unveiled in the autumn statement.
Stamp duty land tax
- From 1 April 2016, higher SDLT rates will be charged on the purchase of ‘additional residential properties’, such as second homes and buy-to-let properties for chargeable consideration exceeding £40,000. The higher rate will be set at 3% above the current SDLT rates for residential property. However, the government will consult on exemptions for corporates and fund purchasers that make significant investments in residential property. The indication is that ownership of more than 15 residential properties will fall within the exemption.
- With effect from 2017, the deadline for filing an SDLT return and paying the tax will be cut from 30 days to 14 days after the effective date. This is part of a trend the chancellor has introduced for accelerating payment of tax.
- With effect from summer 2016, an SDLT seeding relief will be introduced for property authorised investment funds and co-ownership authorised contractual schemes (COACS). A portfolio test of either 100 residential properties or 10 commercial properties, worth at least £100m in either case, will apply. The relief will be available over a period of 18 months with a three-year clawback mechanism. Furthermore, transfers of units in COACS will be SDLT-free.
Annual tax on enveloped dwellings (ATED)
- With effect from 1 April 2016, the reliefs available from ATED and the 15% higher rate of SDLT are to be extended to equity release schemes, property development activities and properties occupied by employees. This is a welcome measure.
Capital gain tax
- There will be an extension of the new rules that apply CGT to residential property sold by non-residents. The deadline rules will be changed so that from April 2019, CGT due on the sale of a residential property will be due within 30 days of the transaction. It will not apply to gains made on properties that are exempt under principal private residence relief. The government will consult on the new payment deadline, taking into account the annual exemption, losses and the different tax rates for basic and higher rate taxpayers. This is yet another example of the chancellor’s accelerated payment of tax trend.
Small business rate relief
- The doubling of the small business rate relief will be extended for a further year from 1 April 2016.
Asset manager remuneration
- Following the new disguised investment management fee rules and recent changes to the taxation of carried interest, statutory rules will be introduced in the Finance Bill 2016 to determine when performance awards received by asset managers will be taxed as income or capital gains. Although the autumn statement contained no detail, the intention from the 2015 consultation document is that the award should be subject to income tax unless the underlying fund undertakes a long-term investment activity.