Despite only being introduced from 6 April 2013, the bar for the Annual Tax on Enveloped Dwellings (“ATED”) was originally set at £2m. This has now been lowered to £1m with effect from April 2015 with an annual charge of £7,500 on those properties falling within the £1-2m band. With effect from April 2016 the bar will be lowered even further to an entry level of only £500,000, with an annual charge of £3,000.
In additional to the above annual charges, there will also be a direct impact on Stamp Duty Land Tax (”SDLT”) and Capital Gains Tax (“CGT”) for enveloped properties – in fact, as far as SDLT is concerned the impact is immediate with the higher 15% rate coming in on 20 March 2014 on properties worth £500,000 or more!
• the above limits of £500,000 and £1m relate to the values of the property as at April 2012.
• a company (or other entity) that falls within the ATED provisions will be subject to a 28% CGT charge on the disposal of any such property. Therefore the CGT scope is now dramatically widened and will apply to disposals of property within the £1-2m ATED band from 6 April 2015 and within the £500,000 – £1m ATED band from 6 April 2016.
• The previous ATED exemptions relating to commercial property development and letting businesses, farmhouses etc. still remain.
• If an exemption is being claimed you will still have to register for ATED and claim the relief, which means an increased tax burden for those impacted.
Another shameless attempt to increase the administrative burden and raise further taxes from those acquiring properties in the UK. With the government indicating that these changes will raise no further revenues for 2014/15 and 2015/16 and only £15m for 2016/17, a cynic may question the logic and intent behind such changes.
Clearly the government does not want property ownership through offshore companies and the best advice now is to probably look at alternative structures. Those individuals now owning properties above £500,000 in value may well need to consider alternative structures ahead of April 2015.
Corporate Tax – Annual Investment Allowance (“AIA”)
The AIA gives businesses a 100% tax deduction for certain qualifying items of plant and machinery.
The current AIA of £250,000 has been doubled to £500,000 for expenditure incurred after 1 April 2014 (for corporates) and 6 April (for individuals) and will run through to 31 December 2015. Thereafter, it will drop back down to £25,000!
A welcome increase in the current rates, which should have the biggest impact for smaller and medium sized businesses.
Taxation of Partnerships
Despite calls from the House of Lords to delay the introduction of these changes, the Budget reaffirmed their introduction with effect from April 2014, albeit the government has confirmed that it will implement some of the changes that were recommended by the Office for Tax Simplification.
True to form, typically rushed through “knee jerk reaction” with massive implications for many and very little time to assess the practical and financial impact.
Tax avoidance schemes – accelerated payments
Recently mooted, measures will now been introduced from Royal Assent for taxpayers to pay “disputed tax” within 90 days where it relates to arrangements caught by DOTAS or the GAAR.
Some may say this is a welcome measure, but there is also a counter argument that says “beware of those bearing gifts!! With the tax at stake effectively being paid up-front, there would seem very little pressure, on an already under resourced HMRC to litigate through the courts in a timely manner to conclude the efficacy of such arrangements.
This flyer is intended for guidance only, and professional advice should be obtained before acting on any information contained herein. Aquarius Tax Consultancy Limited cannot accept any responsibility for loss occasioned to any person as a result of action taken or refrained from in consequence of the contents of this publication.