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Further to our previous article we now have the full draft legislation which will apply the new Annual Residential Property Tax (ARPT) and Capital Gains Tax (CGT) charges relating to certain high-value UK residential property. Broadly, this refers to UK residential properties which are:

(i)       not rented out;
(ii)      worth more than £2m; and
(iii)     held by a "non-natural person” (NNP), most commonly a non-UK resident company.

To summarise the changes:

  1. From 1 April 2013, the new ARPT charge is to apply. The current bands and annual charges are as follows:
    • > £2 million but ≤ £5 million = £15,000
    • > £5 million but ≤ £10 million = £35,000
    • > £10 million but ≤ £20 million = £70,000
    • > £20 million = £140,000
  2. From 6 April 2013, a NNP within the charge to the ARPT will also be liable to UK capital gains tax (“CGT”) on disposal of high-value UK property at a gain. Although these charges are clearly unwelcome for those concerned, they are mostly as expected and there have been some helpful relaxations, most notably:
    • an exemption for existing property development businesses;
    • the exclusion of trusts from the definition of an NNP;
    • re-basing provisions to uplift the value of property held in existing structures to the market value of the property as at 5 April 2013; and
    • relief from the ARPT charge if the relevant conditions cease to be met part way through the year on a pro-rata basis, i.e. if the property is owned by a NNP for, say, 6 months of a chargeable period, then only one-half of the relevant ARPT charge would apply.

The latter three points above in particular give rise to some interesting planning opportunities, and any parties affected would be well advised to review the position to work out the best approach for them. Please contact us if you would like to discuss the impact of the changes and the correct course of action going forward.