Implications of 15pc Stamp Duty Rate for Limited Companies

Simon Whittaker, finance director, explains why the extension of the 15pc stamp duty rate on properties costing over £500k purchased by limited companies won’t affect most landlords financially.

Two years ago the Chancellor introduced the 15pc rate of Stamp Duty Land Tax on purchases of UK residential properties costing more than £2 million by “Non Natural Persons” – basically limited companies and Limited Liability Partnerships. This has been such a “success” for the Chancellor that this year the Budget extended the 15pc rate to properties costing over £500,000.

However, don’t panic, it does not apply to genuine property rental or property development activities – it is just aimed at taxing the (passive) ownership of UK residential properties by limited companies where this has had the effect of avoiding SDLT (and potentially Capital Gains Tax) when the properties are ultimately resold. SDLT for buy to let investors will remain at 4pc in the £500k-£1m bracket and 5pc for properties in the next bracket up to £2 million (although I doubt there are many of these).

Unfortunately though there is an administrative downside for investors using a limited company to purchase their buy to let properties.

Last year the Chancellor introduced a new annual tax (known as ATED – Annual Tax on Enveloped Dwellings) on residential properties valued at over £2 million owned by companies and he is now lowering the value limits to £1 millon from 6 April this year and £500,000 next year. This has the same definition of dwellings falling within its scope as is used in determining the 15pc rate of Stamp Duty – so once again genuine property developers and property rental activities are exempt.

However the ATED return needs to be completed by every company owning UK residential properties above the relevant threshold values (irrespective of whether the properties are exempt from ATED) and filed by 1 October. This looks like just another tiresome form to be filled in – but if you are in any doubt about whether your company is caught within the ambit of ATED then I suggest you get some professional advice.

There have been more recent updates to the rate of Stamp Duty Land Tax, please see our article from Jenny Barrett from December 2014

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