The Chancellor, Rishi Sunak, recently announced some new tax changes with a strong emphasis on encouraging capital spending. These new rules have been put in place with the aim of achieving recovery in the economy following issues associated with COVID-19.
Stamp Duty Land Tax (SDLT)The nil rate band will be maintained at £250k until 30 September 2021, after which it will revert to £125k.
The existing 3% additional SDLT for buyers of second homes, corporate buyers and other property investors will remain. Furthermore, an additional 2% surcharge for non-UK residents has been applied to residential property acquisitions since 1 April 2021. It affects both non-resident individuals and non-natural persons (e.g. companies, trusts, partnerships), in addition to the existing SDLT rates of up to 15%. In other words, the top rate for non-residents could be 17% (Scotland and Wales have their own regimes).
New rules for residential property disposalsFrom 6 April 2020, taxable capital gains made by UK-resident individuals, trustees or personal representatives of a deceased person on the disposal of UK residential property must be reported to HMRC within 30 days of the completion date.
For these purposes, a disposal will include gifts in addition to sales of such property. Payment of the estimated CGT arising on the disposal(s) must be made within the same 30-day deadline. For disposals by UK residents, there are various exceptions to the new reporting and payment rules, for example in cases where no CGT arises on the disposal.
Non-resident immovable property gainsPrior to 6 April 2019, non-UK residents were not subject to CGT in disposals of UK immovable property except in relation to certain disposals of residential property or where a trade was being carried on through a permanent establishment in the UK.
However, the scope of the UK tax net dramatically widened from 6 April 2019: non-UK residents are now subject to UK tax on gains on all direct and certain indirect disposals of interests in UK immovable property, subject to certain exceptions.
The new rules apply to all disposals of UK real property by non-residents that have not previously been within the scope of UK tax e.g. UK commercial property.
Corporation tax changesIt has been announced that the rate of corporation tax will increase from April 2023 to 25% on profits over £250,000. The rate for small profits under £50,000 will remain at 19%, and there will also be relief for businesses with profits under £250,000.
This rate change will impact UK resident companies and also non-UK resident company investors in UK property.
Incentives to encourage investment in Freeport tax sitesSome residential landlords may be interested in diversifying their investment portfolio. Tax reliefs have also been announced to encourage investment in eight Freeport tax sites including East Midlands Airport and Humber Port. This measure will enable tax sites in Freeport locations to be designated and recognised in law as geographical areas where businesses can benefit from Freeport-specific tax reliefs, such as:
● relief from SDLT on the purchase of land or property within Freeport tax sites in England
● Business Rates relief in Freeport tax sites in England