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Property Tax

Detailed Budget Measures

Annual tax on enveloped dwellings

As announced in Budget 2012, legislation will be introduced in Finance Bill 2013 for an annual charge on residential properties valued at more than £2m held by certain non-natural persons.

Following consultation on draft legislation, changes have been made to introduce additional reliefs, modify conditions for some of the reliefs, and alter the requirements to make returns if companies cease to be eligible for relief or become liable to an increased charge. The changes also introduce rules for alternative finance arrangements; provide exemptions for charities and certain others; and set rules for claims, appeals, information powers, disclosure of tax avoidance schemes and for penalties. The annual tax on enveloped dwellings will come into effect on 1 April 2013.

Industry Comment:

There was no last-minute reprieve on the introduction date for the new measures and these are to be enacted on the lines previously announced.  What was to have been the "Annual Residential Property Tax" is now to be known as the "Annual Tax on Enveloped Dwellings" (ATED).  Maybe the original sounded too like a "Mansion tax" and this change perhaps reflects the Chancellor's determination expressed in the Autumn Statement that " we’re not having a new homes tax" -  well, not this year anyway!

Legal expert Alastair Collett, private wealth partner at law firm Bircham Dyson Bell.

CGT: extension to certain non-natural persons disposing of UK residential property valued at over £2m

The Government will legislate in Finance Bill 2013 to introduce a CGT charge payable by certain non-natural persons when they dispose of interests in high value residential property in the UK on or after 6 April 2013.

Broadly, the new tax charge will be payable by these non-natural persons, wherever they are resident, if they were liable to the new annual tax on enveloped dwellings on the property in question. CGT will normally be payable only on gains attributable to periods of ownership after 5 April 2013. However, it will be possible to elect for gains or allowable losses to be computed for CGT purposes by reference to the entire period of ownership. The tax will be charged at 28%.

CCH Comment:

These two new taxes follow on the 15% stamp tax (SDLT) rate on acquisitions of ‘high-value’ residential dwellings that was introduced in March 2012. They were originally billed as part of the attack on ‘enveloping’ property for purposes of SDLT avoidance, but that justification very rapidly morphed into one simply of ‘high value properties paying their fair share’. There are of course the reliefs from charge for ‘genuine business users’, but note that these reliefs still have to be claimed by completing returns.

Mark Cawthron, Tax Writer (comments on the above two measures).

Industry Comment:

The mansion tax is being accompanied by an extension to the capital gains tax regime, so that owner occupied properties, which could previously have been sold by foreign companies without any gain being subject to tax, will now be subject to capital gains tax at 28%.


The rationale for this extension was never clear, given that the aim of the measures was apparently to encourage the sale of bricks and mortar (subject to Stamp Duty Land Tax) and discourage sales of the property owning company (tax free).  These measures make it even more expensive to transfer bricks and mortar compared to shares in companies.


Paul Emery, Real Estate Tax Director at PwC.

Stamp duty land tax (SDLT): changes to the 15% rate

The Finance Bill 2012 introduced a 15% rate of SDLT on the acquisition by certain non-natural persons of dwellings costing more than £2m. The scope of the 15% rate was included as part of the consultation on the annual charge.

A number of reliefs will be introduced in Finance Bill 2013 to reduce the rate to 7%. The reliefs will, broadly, match those where there is relief against the annual tax on enveloped dwellings. However, these SDLT reliefs will apply only if the property continues to satisfy the qualifying conditions throughout the following three years. If it does not, additional SDLT will become payable.

SDLT: transfer of rights

As announced in Autumn Statement 2012, legislation will be introduced in Finance Bill 2013 to reform the stamp duty land tax rules for ‘transfer of rights’. Following consultation, the legislation has been revised to:

This measure will have effect from Royal Assent to Finance Bill 2013.

SDLT avoidance

Legislation will be introduced in Finance Bill 2013 to put beyond doubt that certain SDLT avoidance schemes that abuse the transfer of rights rules do not work.

These changes will have retrospective effect to 21 March 2012. A guidance note with further detail about the changes is available on the HMRC website.

For more details see the Tax Information and Impact Note.

SDLT: leases simplification

As announced in Budget 2012, legislation will be introduced in Finance Bill 2013 to simplify the reporting requirements that apply when a lease continues after the expiry of its fixed term and where an agreement for lease is substantially performed before the actual lease is granted.

The rules on abnormal rent increases will also be abolished. Following consultation the legislation has been revised to provide clarification of how the provisions apply in certain circumstances. The legislation will have effect from the date of Royal Assent to Finance Bill 2013.