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Real estate taxation: comparison of the manifestos

Real estate taxation: comparison of the manifestos

Overview

Here is a brief summary of the main taxation changes that will be relevant to the real estate sector from the main party manifestos and accompanying documents.

The Conservative announcements in relation to the taxation of real estate

  • Corporation tax will remain at 19%. The planned 17% will not be implemented

  • Income tax rates will not be increased

  • 3% SDLT surcharge on the purchase price of residential property by non-UK tax residents. This is an increase from the 1% surcharge the government consulted on earlier in 2019 and would bring the top rate to 18%

  • VAT: no change

The Labour manifesto proposals in relation to the taxation of real estate

  • Capital gains
    • capital gains tax is to be at marginal income tax rates (ie potentially at rates of up to 50% where total income and gains from £125,000).  This will presumably also apply to non-residents on indirect disposals as well as direct disposals, following the extended scope of the charge which came in earlier this year

    • the annual exempt allowance for CGT is to be abolished above a de minimis threshold of £1,000
    • the trading exemption from taxation of capital gains for non-UK residents holding UK property (NRCGT) will be removed and replaced with an exemption for small investors with a £1m investment limit. This could have major implications for certain infrastructure projects

    • the exemption from NRCGT for non-UK residents holding 25% or less in UK property rich vehicles will be abolished and replaced with an exemption on investments up to £1m only (there is no de minimis already for investors in UK property rich collective investment vehicles)

    • primary residences will continue to be exempt from CGT
  • Corporation tax is to rise to 21%, then to 24% in 2021 and then again to 26% in 2022

  • Income tax

    • additional rate (45%) to be payable from £80,000

    • "super-rich" rate of 50% to be charged from £125,000

    • dividends to be taxed at normal income tax rates and abolition of the lower rate of tax on dividends (subject to a de minimus)

  • Consideration will be given to derecognition of the Channel Islands Stock Exchange (now The International Stock Exchange) as an HMRC recognised stock exchange. The loophole referred to in the Labour paper is the Quoted Eurobond Exemption from tax on bonds. However, such a move would also have implications for the many UK REITs and other "listed securities" listed there. Expect heavy lobbying to the effect any such move is targeted at specific loopholes and does not go much wider

  • Offshore Property Company Levy of 20% on purchases of residential property by companies and trusts located in tax havens based on a blacklist to be developed by HMRC

  • Annual levy on second homes used as holiday homes equivalent to 200% of the current council tax bill for the property e.g. if £1000 council tax bill, levy would appear to be an additional £2000

  • A "use it or lose it" tax payable by developers on stalled housing developments

  • Councils to be able to tax properties empty for over a year

  • UK public register of beneficial ownership in companies to be extended to show all interests – not just those over 25%

  • Public register of trusts

  • Extending HMRC's preferential status on insolvency

  • Scrapping non-dom status, which permits UK tax resident, but non-domiciled individuals to be taxed on a remittance and UK source (rather than worldwide) basis, and consulting on an exception for foreign residents in the UK for a short period of time

  • The IHT position on main residence will revert to £325,000 per person, reversing the changes implemented by George Osborne

  • VAT: no change

The Liberal Democrat manifesto proposals in relation to the taxation of real estate

  • Corporation tax to rise to 20% and 1% on all income tax rates

  • Abolition of annual allowance for CGT

  • Replace Business Rates in England with a 'Commercial Landowner Levy' based on the land value of commercial sites rather than their entire capital value, moving the burden from tenants to landowners

  • Graduating Stamp Duty Land Tax by the energy rating of the property

  • Reducing VAT on home insulation

  • Allow local authorities to increase council tax by up to 500% on second homes

  • SDLT surcharge on overseas residents purchasing residential property

  • VAT: no change

 

 

 

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