TT231: Landlords are under attack!

It is often best to wait for the dust to settle following a Budget or an Autumn Statement and this is no exception. The headline grabbing tax measures were in respect to Stamp Duty Land Tax (“SDLT”) and Capital Gains Tax (“CGT”). This topical tip will focus on both CGT and SDLT.

Stamp Duty Land Tax – Residential Properties

As many of you are aware, SDLT is payable on purchases of residential properties within 30 days of completion.

The Government announced that from 1 April 2016, any additional residential property purchased will be liable to pay higher rates of SDLT which are set to be 3% above the current rates. This announcement seems particularly aimed at individuals that purchase second homes and buy to let landlords. This proposal is thought to be applicable to companies but we await details of any exemptions that may be available.

This is undoubtedly attacking buy to let landlords as the cost of purchasing residential properties will be higher from April 2016. This announcement is in addition to the new proposals to be introduced from April 2017 which will restrict loan/mortgage interest relief.

The time allowed to pay the SDLT (and to file the corresponding return) will be reduced from April 2017 from 30 days to within 14 days.

Capital Gain Tax – Residential Properties

Unfortunately the pain for buy to let landlords and second home owners does not end there.

Unless you are a non-resident, capital gains tax is payable by individuals to HMRC by 31 January following the end of the tax year. From April 2019, a payment on account of any CGT due on the disposal of residential property will be required to be made within 30 days of the completion of the disposal. This will not affect gains on properties which are not liable for CGT due to Private Residence Relief.

This does raise the question as to how this will be administered. Will an additional return be needed? What happens if the individual is not registered under self-assessment? How will this fit into the new HMRC’s digital tax accounts? Will you remember to tell your accountants within 30 days?

Capital Gains Tax – one last surprise

The Government will be changing some rules to prevent opportunities for income to be converted to capital in order to gain a tax advantage.

Taking income as gains is often more beneficial as you can utilise capital losses, the tax free annual exemption and potentially benefit from the 10% rate afforded by entrepreneurs relief.

It is possible to take money from a company as capital during a winding. It is has been suggested by some commentators that this opportunity will be blocked. However, the devil will be in the detail (when this is published!).

If you have any further questions on the above tax changes, or any of the proposals in the Autumn Statement, please do not hesitate to get in contact with us.

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