The tax on the super rich who try to dodge stamp duty by making their residential purchases through overseas companies, which was announced in last year’s Budget, is starting to take effect.
As of March 21 2012, the stamp duty land tax (SDLT) charge paid on UK properties sold for more than £2m through offshore companies became 15 per cent, as opposed to the 7 per cent standard rate for properties bought by individuals in the same price bracket.
Under the previous rules, if someone bought a UK company that owned a residential property instead of buying it direct, they only paid 0.5 per cent of the purchase price, so purchasing shares in a company owning a property gave rise to significant SDLT savings.
However, even that amount could have been brought down to zero by taking out a mortgage and if the property was held within an offshore company there was no tax to pay regardless of the value of the assets.
According to HMRC, the rules include bodies corporate, for example companies, collective investment schemes and all partnerships with one or more members who are either a body corporate or a collective investment scheme. Favoured locations for such companies were the British Virgin Islands, Guernsey, the Cayman Islands or the Isle of Man.
Chancellor George Osborne brought the tax in because he said the Government would no longer tolerate this “major source of abuse” of the SDLT laws that aroused anger of many UK citizens.
He added that he had given plenty of public warnings that the abuse should stop and therefore brought the tax into effect on the day of the announcement, with the added bonus, of course, that the Treasury is expecting to benefit from it to the tune of £1bn over the next five years.