UK Law and Practice Contributed by: Colin Rodrigues and Harminder Sandhu, Hawkins Hatton Corporate Lawyers Ltd
SDLT on Residential Property Owned by a Corporate Vehicle SDLT is charged at 15% on residential properties costing more than GBP500,000 that are bought by certain corporate entities. However, the 15% rate does not apply to property bought by a company acting as a trustee of a settlement or property bought by a company to be used for: • a property rental business; • property developers and traders; • property made available to the public; • financial institutions acquiring property in the course of lending; • property occupied by employees; • farmhouses; and • a qualifying housing co-operative. In addition, there is a 3% surcharge on residen - tial properties bought by companies. SDLT on Shares in a Company SDLT is payable at a rate of 0.5% of the entire transaction. SDLT will be payable on transac - tions, including a change of control of a com - The sale of real estate is exempt from VAT unless the seller has opted to tax the land and build - ings. Most new-build commercial properties will attract standard-rate VAT at 20%. If, however, a property is acquired with a sitting tenant, the “transfer as a going concern” exemption will apply, provided that both parties are VAT-reg - istered, and hence no VAT will be payable on the purchase price. This exemption only applies where the buyer opts to tax the property before transfer. HMRC has made some changes to the process for opting a property for tax – namely, HMRC pany if shares are sold. Value-Added Tax (VAT)
will no longer issue an acknowledgement of the option for tax application. The requirement for a person to notify HMRC of the exercise of an option to tax will remain, and can be charged
within 30 days of that VAT. Capital Gains Tax (CGT)
CGT is payable by an individual on the disposal of residential real estate in the UK (other than the individual’s main residence) in respect of the gain (profit) made, at a rate of 28% for a higher- rate taxpayer and at a lower rate for a basic-rate taxpayer. A 20% CGT rate applies for commer - cial property. A UK-based company will pay corporation tax at a rate of 25% on the investment gain (subject to any indexation allowance, which now only accrues up to 31 December 2017) on the dis - posal of a commercial or residential property. Since April 2023, the tax-free allowance dropped from GBP12,300 to GBP6,000, dropping further to GBP3,000 in April 2024. The CGT exemption for non-resident investors in respect of non-residential property was removed from April 2019, albeit with exemptions. “Non-resident” CGT (NRCGT) is payable at 28% on any post-April 2015 gains made on UK residential property by individuals who are non- resident for tax purposes. From 6 April 2019, NRCGT was extended to post-April 2019 gains in respect of commercial property, albeit with certain exemptions. 2.11 Legal Restrictions on Foreign Investors There are currently no restrictions on foreign investors acquiring property in the UK.
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