Author: Helena Luckhurst
The UK Government has confirmed that in April 2013 it intends to introduce:
Trustees, whether UK resident or not, are not affected by either of these changes.
What is the ARPT?
It is an annual tax, chargeable in respect of qualifying properties which are owned, or acquired, by NNPs during the ARPT tax year (which runs from 1 April to 30 March the following year, beginning 1 April 2013). The charge will be levied in full for qualifying properties owned at 1 April. Qualifying properties acquired during the ARPT year will attract a proportionately reduced charge. The annual chargeable amounts for the 2013/2014 ARPT tax year are:
|GBP 2,000,001 – 5,000,000||GBP 15,000|
|GBP 5,000,001 – 10,000,000||GBP 35,000|
|GBP 10,000,001 – 20,000,000||GBP 70,000|
|GBP 20,000,001 +||GBP 140,000|
The annual chargeable amounts will increase each year in line with the Consumer Prices Index published by the UK Office for National Statistics.
If an NNP and a natural person connected to the NNP own separate interests in the same property, the natural person’s interest will be aggregated with the NNP’s interest for the purposes of ARPT.
The basis of valuation is market value. Properties will be valued every five years or on acquisition or part disposal. The first valuation date is 1 April 2012 for properties owned at this date.
Significantly, the Government has announced various reliefs, which could prevent an NNP being liable to ARPT. These reliefs affect properties owned by NNPs operating:
Relief will also be given to:
All the above reliefs are subject to conditions and, therefore, reliance on a relief should not be assumed without obtaining advice specific to your circumstances. For example, reliefs will be denied if the property is occupied by certain individuals who, broadly speaking, include the person ultimately funding the purchase by the NNP and that person’s relatives.
NNPs are obliged to submit an ARPT return, and pay any ARPT due, by 30 April each year (or 30 days following acquisition). Entitlement to any relief must be claimed by submitting an ARPT return. As ARPT is payable mainly in advance (payment on 30 April in any given year is in respect of ARPT for the period from 1 April that year to 30 March the following year), repayment claims can be made later if ARPT for a property does not apply during the entire year. However, for 2013 only, ARPT returns for qualifying property held at 1 April 2013 must be submitted by 1 October 2013 and any ARPT paid by 31 October 2013.
What should I do if I think I am affected by ARPT?
Although the Government has only published draft legislation implementing the ARPT, for comment, we do not expect there to be significant changes to the main features of the tax.
We recommend that an assessment of whether any of the reliefs will apply to your situation should be the first step.
If no reliefs apply, we will be pleased to advise you on reorganising, or terminating, your property holding structure, as appropriate. What is best to do will depend on factors such as your UK tax residency and domicile status, how long you intend to hold the property, to what use the property is being put, and whether you anticipate the property increasing in value.
15% Stamp Duty Land Tax (SDLT)
Since 21 March 2011, NNPs purchasing UK residential property in excess of £2,000,000 have paid 15% SDLT. However, the Government has indicated that it will amend SDLT legislation so that, from royal assent of the Finance Bill 2013 (expected July 2013), any NNP qualifying for any of the ARPT reliefs will have to pay 7% SDLT, instead of 15% SDLT. The relief must apply for at least three years following purchase, or the additional 8% SDLT will become due.
This may well have an impact on the timing of affected property purchases.
Extension of CGT regime to non resident NNPs
The publication of the draft legislation effecting
this change has been delayed until January 2013. However, the following seems clear from the Government’s recently published response to the Treasury’s consultation about this change:
The lack of draft legislation is unhelpful for NNPs who want to begin to assess their response to both this change and the introduction of ARPT. However, the will of the Government is clear from its response. Therefore, those affected should consider taking advice on this issue now, particularly given that there appear to be only a few months left before the new rules come into effect.
Early advice essential
We remain concerned that it may not be possible to reorganise existing structures in time for early April 2013, when these new measures come into effect, unless action is taken quickly. In particular, liquidating non UK companies by the deadline, if required, could prove problematic if there is a surge in demand.
If you are concerned about how these changes will affect you, please speak to a member of our Tax Group (Helena Luckhurst, David Way and Huw Witty), or your usual contact at Fladgate LLP, as soon as possible.
Helena Luckhurst, Partner, Fladgate LLP (firstname.lastname@example.org)