Budget 2014 - update

Last week's Budget announcements were light on the property tax front.

High value UK residential property

Since March 2012, a package of tax measures targeted at "high value" UK residential property held by "non-natural persons" (NNPs) has been introduced, in stages. These measures, subject to a number of exemptions for NNPs holding property for genuine commercial reasons, apply to UK residential property valued at over £2m and acquired or held by companies, partnerships with corporate members and collective investment schemes.

The original intention behind the package was to discourage the use of NNPs to hold such high value residential property as a means of tax avoidance.

It was announced in the Budget that these measures would be extended – again in stages – to UK residential property held by NNPs with a value in excess of £500k:

• from 20 March 2014 SDLT at 15% is charged on acquisition of such property by NNPs

• from 1 April 2015 (for such properties valued between £1m and £2m): the Annual Tax on Enveloped Dwellings (ATED) will apply, at an annual charge of £7k. CGT at 28% will apply to any gain (accrued since that date) on disposal by an NNP

• from 1 April 2016 (for such properties valued between £500k and £1m): the ATED will apply, at an annual charge of £3.5k. CGT at 28% will apply to any gain (accrued since that date) on disposal by an NNP

It has to be wondered how many NNPs are used for tax avoidance purposes to acquire and hold residential property within this lower valuation band. The extension of the rules feels more like a revenue-raising exercise (and one with an optimistic target of an extra £90m per year).

SDLT relief – property authorised investment funds

The Government will consult on the introduction of an SDLT relief for the seeding of property authorised investment funds (PAIFs). This would allow property to be transferred, without attracting an SDLT charge, between vehicles where the underlying