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HMRC Issues Guidance On Enveloped Dwellings Duty

by Robert Lee, Tax-News.com, London

11 May 2015


HM Revenue and Customs (HMRC) has issued updated guidance on the extension of the package of UK taxes that affect residential properties held by legal entities.

The guidance follows the entry into force of the Annual Tax on Enveloped Dwellings Avoidance Schemes (Prescribed Descriptions of Arrangements) (Amendment) Regulations 2015 on April 1, 2015.

The guidance and legislative amendment impacts companies, partnerships with company members, and collective investment schemes (collectively referred to as non-natural persons (NNPs)) which purchase, own, or dispose of residential property in the UK worth over GBP500,000 (USD770,000) and up to GBP2m.

The new regulations extend the 15 percent rate of stamp duty land tax (SDLT) to the acquisition of residential property, effective for transactions where the effective date (normally the date of completion) is on or after March 20, 2014. An additional annual tax on enveloped dwellings (ATED) band applies to residential properties worth between GBP1m and GBP2m from April 1, 2015, and results in an annual charge of GBP7,000.

In the first year, returns applicable to this band will not be required until October 1, 2015, with payment required by October 31, 2015. A further ATED band will apply to residential properties worth between GBP50,000 and GBP1m, with an annual charge of GBP3,500, from April 1, 2016.

All corporate and other "envelopes" affected by the GBP1m-GBP2m ATED band are now also subject to capital gains tax (CGT) on disposal of the properties held, at 28 percent. The charge, effective since April 6, 2015, only applies to that part of the gain worth more than GBP1m and not more than GBP2m, and to the part of the gain accrued on or after that date.

The ATED-related CGT will be extended to properties worth between GBP500,000 and GBP1m from April 6, 2016.

TAGS: capital gains tax (CGT) | compliance | tax | investment | tax compliance | property tax | tax avoidance | revenue guidance | United Kingdom | tax authority | tax rates | stamp duty | HM Revenue and Customs (HMRC) | tax reform | regulation | HM Revenue and Customs (HMRC)

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