GGRESSIVE crackdown against stamp duty avoidance on high-end properties will begin today, as the government slaps a punitive tax on the sales of expensive homes that wealthy people put into companies’ names.
Sales of properties worth £2m or more that are “enveloped” in a bid to avoid the tax, will now be hit with 15 per cent stamp duty – over double the new level of stamp duty (seven per cent) on properties of the same price bought by individuals.
Authorities will also begin consultations on a retrospective charge on the ownership of residential properties owned by “non-natural persons such as companies”.
Chancellor George Osborne had been expected to close a loophole by which houses could change hands without paying stamp duty if they were owned by foreign companies and the shares in the company, rather than the property itself, were sold.
“Let me make this absolutely clear to people,” Osborne told the House of Commons, during his Budget speech. “If you buy a property in Britain that is used for residential purposes, then we will expect stamp duty to be paid.
“I will not hesitate to move swiftly, without notice and retrospectively if inappropriate ways around these new rules are found. People have been warned.”
The Treasury’s small print said that it aimed to “put beyond doubt” that Stamp Duty avoidance schemes would from now on be ineffective, saying that the mechanism was part of the government’s “fairness agenda”.
Paul Emery, a tax director at PwC, said that Osborne was “throwing the book at avoidance”.
“The consultation on an annual property tax for high value residential held by companies and a capital gains tax on off-shore companies may cause owners to think twice about their current ownership structure,” Emery said.
The Treasury told City A.M. that the new measures would apply to 5,000 residential properties in the UK, which have an estimated total value of around £20bn. The level of revenue raised will depend on the size of the impending tax, and the number of properties subsequently sold.
Owners could buy their properties back from the companies that they are registered with, but would have to pay the new seven per cent level of stamp duty.