Real Estate Investor Magazine South Africa Real Estate Investor Magazine - June 2017 | Page 55

What changes when using a company?
If the buying entity is a company, partnership or collective
investment scheme, SDLT is charged at the additional
3% rate, jumping to 15% above £500,000 subject to
exemptions: i.e. if it’s a rental company or development
business, or if the property is let to unconnected parties,
or for employee use or is a farmhouse.
Trustees beware
When don’t you pay the higher rate?
1 If the ‘chargeable consideration’ (usually the price • If Trustees receive all the income and proceeds
from the property, they are treated as owning the
property, if they are the legal owner or not.
• The beneficiary of a bare trust is treated as the
purchaser.
• If the trust holds the property and the beneficiary
is entitled to occupy for life, or receives income
from the property, the beneficiary is treated as the
purchaser.
2 Property is purpose-built, student accommodation, a 4 Annual Tax on Enveloped Dwellings (ATED)
paid) is less than £40,000.
mobile home, caravan or house boat.
3 If someone else has held a lease on the property for
over 21 years.
4 When buying a lease with less than seven years to
run.
This is one to watch when you use a company to buy
property worth more than £500,000. Such properties
are known as “enveloped dwellings”. ATED is an
annual charge calculated by reference to the current
value of the property:
Chargeable amounts for 1 April 2017 to
31 March 2018
Value Annual charge
More than £500,000 but not more than £1 million £3,500
Between £1 million and £2 million £7,050
Between £2 million and £5 million £23,550
Between £5 million and £10 million £54,950
Between £10 million and £20 million £110,100
Over £20 million £220,350
The acquisition value applies until April 2022, when
the property must be revalued and every five years
thereafter. You decide whether to self-assess or use a
professional valuer, but any valuation deemed wrong
by HM Revenue & Customs could lead to a penalty,
plus increased ATED and interest. ATED returns
must be filed by 30th April each year, even if no
ATED is payable.
You may claim relief from ATED if the property is:
• Let to a third party on a commercial basis;
• Open to the public for at least 28 days a year;
• Being developed for resale by a property developer;
• Owned by a property trader for the sole purpose of
resale;
• Repossessed by a financial institution;
• Provides living accommodation to qualifying
employees;
• A farmhouse occupied by a farm worker or a
former, long-serving farm worker;
• Owned by a registered provider of social housing.
www.reimag.co.za
In summary, SDLT and ATED will have the greatest
impact on how and what an investor purchases in
England.
NOTE:
1 This article provides a summary only, relating to
residential property in England and Wales. Rules
in other parts of the UK may differ. Likewise
commercial and other non-residential property is
treated differently in many respects.
2 This is the situation as at 5th May 2017 and may
change. Tax is complicated and buyers should not
rely on this article as a substitute for professional
tax advice.
3 Part 2 of this article will deal with capital taxes.
RESOURCES
Bartons Solicitors, Gerald Edelman
JUNE 2017 SA Real Estate Investor
53