Budget Real Estate Taxation
The wish expressed by a number of investors and managers at this year’s global MIPIM property conference was for a ‘boring budget’. In terms of new or unexpected measures impacting the property industry their wish has largely been fulfilled. In particular there will be relief that the Chancellor has continued to resist pressure to levy the owners of UK property with further hikes to stamp duty land tax or any form of “mansion” tax.
Owners of residential property valued at more than £2m who have structured their ownership to be held indirectly (e.g. via a company or trust) are subject to a number of additional charges and levies.
For commercial property companies which are not structured as REITs, the reduction in the main rate of corporation tax to 20% from April 2015 will entirely erode the tax rate benefit of holding property offshore in relation to property rental income (the latter being subject to income tax at 20% for non-resident companies or trusts). The potential advantages in terms of tax on capital gains and possibly stamp duty land tax should continue to be enjoyed by offshore structures holding UK commercial property.