We previously posted an article entitled ‘Capital Gains Tax on property owned by non-residents’ discussing capital gains tax for non-residents and made reference to the annual tax charge arising on companies owning residential properties.
This Annual Tax charge on Enveloped Dwellings (or ATED for short) is worth mentioning again due to proposed changes. The legislation was first introduced in April 2013 and currently only applies to properties with a value exceeding £2million. However, from April 2015 the ATED charge will apply to properties worth over £1million and from April 2016 the value is reducing further to properties worth over £500,000.
Far more companies are going to be caught as a result of the above. This is significant due to the fact that as well as the ATED charge, the rate of Stamp Duty Land tax applicable on purchase is 15% (rather than a previous maximum of 7%) and capital gains tax chargeable on disposal calculated at a rate of 28% with no indexation allowance being due.
directors / shareholders of SME’s should carefully consider the tax consequences of their company purchasing and owning residential properties. For companies already owning residential properties, they need to consider whether the property will be caught by the ATED tax charge and look at the possibility of removing the property from corporate ownership.
Scott Burkinshaw
Scott is Tax Partner at Shorts, specialising in providing strategic corporate and personal tax advice.
View my articlesTags: Land & Property, Business Taxes
