CGT tax on residential properties could have ‘difficult side effects’

THE GOVERNMENT is to increase the stamp duty land tax applied to residential properties over £2m bought into a corporate envelope to 15%.

Chancellor George Osborne said the government will also consult on the introduction of a large annual charge on those £2m residential properties which are already contained in corporate envelopes.

The government is also planning to introduce a capital gains tax to cover gains on the disposal of residential property held in overseas envelopes.

"If you buy residential property in the UK we expect you to pay stamp duty. That is the clear intention of government," Osborne said.

"The new 15 % rate of SDLT for sales of residential property to non-UK companies could have unintended effects if it inhibits commercial transactions, for example, the acquisition of a block of flats by a French company," says Andrew Loan, tax partner at Macfarlanes.

Patrick Stevens, tax partner at Ernst & Young said: "Many people will be able to understand the reason for these changes. However some people hold property through companies for reasons completely unconnected with tax.

For example, for people who come from certain other countries who have forced heirship rules, it is the only way of passing on their assets as they wish to do so. For others it is important to maintain privacy about their assets. In these and other cases these rules will have difficult side effects."