Owning a Property Abroad

Many UK residents purchase homes abroad through a UK company incorporated solely for that purpose. Legislation will be introduced to make it clear that if a director of that company stays in the overseas property, that stay will not be taxed in the UK as a benefit in kind.

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Tax incentives for development of brownfield land: a consultation

Government is consulting on land remediation relief (which permits an enhanced 150% deduction for qualifying expenditure), with proposals to:

  • extend it to long-term derelict land (land derelict since 31 March 1998) where derelict works, buildings and structures are a barrier to
  • development (but restricting the relief to demolition/removal, making good obsolete services and creating access to the site);
  • targeting it more narrowly to promote new development by linking expenditure qualifying for relief to planning consent;
  • extending it to the clean-up of Japanese knotweed.

Government is also consulting on changes to the exemption from landfill tax for contaminated waste. It suggests that the exemption should be removed, with the additional tax raised to be used to fund the new enhanced land remediation relief.

Closing date for responses is 14 June 2007.

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Industrial Buildings Allowances and Agricultural Buildings Allowances

The Government is proposing a reform of the capital allowances regime which includes the gradual withdrawal of industrial buildings and agricultural buildings allowances over a period of four years.

To pave the way for the reform, between 21 March 2007 and the date of final withdrawal, neither balancing adjustments nor a recalculation of writing down allowances are required in respect of the disposal of a qualifying property unless the expenditure relates to a qualifying enterprise zone or the change of ownership is pursuant to a pre-21 March 2007 disposal contract.

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Capital Allowances: Business Premises Renovation Allowance

100% initial allowances will be available to businesses as a deduction against their taxable profits where they have incurred capital expenditure (on or after 11 April 2007) to bring back into use their business property which is situated in designated disadvantaged area.

The property in question must have been vacant for at least one year and the relief is available to businesses incurring the costs who own or lease the property.

Certain specific industries are excluded from obtaining these allowances.

Currently, expenditure in relation to commercial buildings (such as offices and retail premises) does not qualify for capital allowances.

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SDLT: Exchanges of property between connected individuals

New rules are to be introduced in the Finance Bill 2007 regarding the treatment of exchanges of property between connected individuals (e.g. those who are married or related).

For the purpose of determining the applicable rate of SDLT, the two legs of the exchange will not be treated as linked transactions.

The new rules do not apply to exchanges between companies who are connected.

The new rules will apply to transactions with effective dates falling on or after the date when the Finance Bill 2007 receives Royal Assent (anticipated to be in Summer 2007).

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SDLT anti-avoidance measures

The SDLT anti-avoidance rules (relating to schemes designed to avoid SDLT and partnerships) which were announced in the 6 December 2006 Pre-Budget Report had immediate effect. The Regulations implementing those rules only have effect through to mid 2008.

These anti-avoidance rules will be amended to reflect accepted representations and be given permanent effect through incorporation in the Finance Bill 2007.

The amended anti-avoidance rules will apply to transactions with effective dates falling on or after the date when the Finance Bill 2007 receives Royal Assent (anticipated to be in summer 2007). In the meantime the SDLT anti-avoidance rules from the Pre-Budget Report will continue to have effect.

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SDLT relief for shared ownership trusts

New rules are to be introduced in the Finance Bill 2007 to extend SDLT relief to purchasers of affordable housing from shared ownership trusts involving qualifying bodies. Previously the relief was only available in respect of shared ownership leases.

Qualifying bodies include local housing authorities and housing associations.

The relief will apply to home purchases with effective dates falling on or after the date when the Finance Bill 2007 receives Royal Assent (anticipated to be in summer 2007).

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Payment of SDLT and self-certificate

New rules to be introduced in the Finance Bill 2007 mean that the SDLT payment will not be required to be sent to HM Revenue & Customs at the same time as the submission of the land transaction return.

However, the deadline for the payment of tax is unchanged – payment must be made within 30 days of the effective date of the transaction.

The self-certificate (form SDLT60) will be amended to allow an authorised agent (rather than the purchaser) to complete the declaration on the form.

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SDLT: Surplus School Land

Obsolete old rules relating to stamp duty and SDLT relief in connection with the transfer of surplus school land to public bodies will be repealed in the Finance Bill 2007.

Existing SDLT relief for public bodies is already potentially available in respect of transfers of surplus school land. That relief will be extended with effect from 25 May 2007.

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SDLT relief for new zero carbon homes

Buyers of brand new certified zero carbon homes will be fully or partially exempt from SDLT:

  • buyers of homes priced at £500,000 or less will be fully exempt from SDLT; and
  • buyers of homes priced in excess of £500,000 will have their SDLT liability reduced by £15,000.
  • The relief is available on purchases made on or after 1 October 2007 but before 1 October 2012.

To qualify for the relief, the homebuyer will need to have a certificate (issued as part of the building control process and not issued by HM Revenue & Customs) confirming that the house meets the requisite criteria.

The criteria include requirements that the house achieves average zero carbon emissions from all energy use over the period of a year, have regard to energy efficiency and use of renewable energy sources. The house will not qualify if it is connected to the gas main.

Details of both the qualifying criteria and the certification process are to be announced at a later date.

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Increases to Landfill Tax Rates

Under new rules to be introduced in the Finance Bill 2007, the rate of landfill tax will be increased from the current rate of £21 to £24 per tonne from 1 April 2007, and then further to £32 per tonne from 1 April 2008. In addition, the lower rate of landfill tax will be increased from £2 per tonne to £2.50 per tonne from 1 April 2008.

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Landfill Communities Fund: Increase in value and simplification package

From 1 April 2007 the maximum credit that landfill site operators may claim against their annual landfill tax liability will be reduced from 6.7% to 6.6%.

In addition, new rules will simplify the accounting and governance of environment bodies enrolled under the Landfill Communities Fund.

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Relief from 40% trust rate of tax for service charges and sinking funds in the private sector

Under new rules to be introduced in the Finance Bill 2007, the existing relief from the special trust tax rate of 40% for service charges and sinking funds held on trust by certain social landlords will be extended to all landlords where their income arises on or after 6 April 2007.

As is currently the case, the first £1,000 of income from the investment of the funds received will be chargeable at 20%, with the remainder chargeable at 40%.

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Extensions of Landlords Energy Saving Allowance (LESA)

Under new rules to be introduced under the Finance Bill 2007, floor insulation will be added to the list of energy saving items that qualify for the LESA. Up to £1,500 will be available for each property (which includes each flat in a building), and the allowance will be available until 2015.

If approval is given by the European Commission, the LESA will be extended to be made available to landlords paying corporation tax (rather than being limited to those that pay income tax).

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Increase in Aggregates Levy

New rules in Finance Bill 2007 mean that the levy on aggregates exploited after 1 April 2008 will be £1.95 per tonne, an increase of 35p per tonne over the current rate.

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Exemption for Aggregate from the Improvement, Maintenance and Construction of Railways, Tramways and Monorails

New rules in Finance Bill 2007 mean that there will be an exemption from levy on aggregate removed from the grounds along lines or proposed lines of rail transport. The aggregate can be removed for improvement, maintenance and construction purposes.

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