Annual Residential Property Tax

Mansion tax, which describes generally an increase in taxation of high value properties has been a political hot potato in the UK for a while now. In December, the Chancellor finally declared the UK government’s intention and it was probably not as bad as was first feared (by owners of high value properties) as it is targeting quite a niche group of property owners. That niche group could involve a number of Gibraltar structures owning high value UK residential property.

On 1 April 2013 the Annual Residential Property Tax (“ARPT”) will come into force presenting a short window of opportunity for some taxpayers to consider the tax efficiency of their current structures and undertake any restructuring.

Who will be affected by the ARPT?

The ARPT will be payable by companies, partnerships and collective investment schemes, referred to as Non Natural Persons (“NNP”), owning high value residential property situated in the UK valued at over £2m.

What is the ARPT charge?

The ARPT charge will be calculated using a banding system based on the value of the residential property as follows:

Value of Property Annual Charge 2013 / 2014

£2m – £5m £15,000

£5m – £10m £35,000

£10m – £20m £70,000

£20m+ £140,000

Other changes affecting residential property owned by a NNP

The value of the residential property for the first 5 years of the ARPT will be the value as at 1 April 2012, or on the date of purchase if later, with a revaluation being required at 1 April 2017 for use from 1 April 2018. A proportionate charge will apply where a residential property moves into or out of ARPT.

Capital Gains Tax: will be introduced on the sale or gift of residential property. The rate of Capital Gains Tax has not yet been announced but could be as high as 28%. Further detail is expected in the 2013 Budget.

Stamp Duty Land Tax: was increased from 21 March 2012 to 15% on certain residential property transactions, including sales, transfers and gifts.

Is there a solution?

There is no “one size fits all” solution – each property ownership scenario will need to be considered separately on its own set of circumstances. We are well connected with specialist tax advisers in the UK who are ideally positioned to assist anyone who may be affected by the introduction of the ARPT. There are significant tax savings to be achieved with careful planning which is non-aggressive.

The ARPT comes into force on 1 April 2013 so time is short.