George Osborne delivered an optimistic budget yesterday against a background of encouraging economic statistics. The overall emphasis was on savings and pensions and was relatively light on changes to corporate and property taxation, with one notable exception: enveloped property.

An unexpected sting in the tail of the Chancellor's speech for corporate purchasers of residential property was the immediate extension of the 15% rate of SDLT to residential properties worth more than £500,000 purchased by corporate vehicles. This amounts to a very significant widening of the tax net, particularly in London and the South East, as until now this punitive rate only applied to enveloped properties worth in excess of £2million. Generally, the old higher threshold will continue to apply to properties purchased under contracts exchanged before 20 March 2014 even if completion takes place at a later date. The current exemptions from the 15% rate including those for commercially let residential property and development and trading businesses will apply to the new threshold.


The scope of ATED (the annual tax on enveloped properties which was introduced from April 2013) will be similarly extended but not with immediate effect. From 1 April 2015 a new band of ATED will apply to residential properties worth more than £1mil but not more than £2mil on which an annual charge of £7000 will be levied. From 1 April 2016 a further additional band will apply to residential properties worth more than £500,000 and less than £1mil on which an annual charge of £3,500 will be payable. The bands will otherwise remain unchanged and the current reliefs/exemptions will continue to apply. Helpfully the government will consult on the possible simplification of the administration of ATED to reduce compliance for companies, particularly where reliefs are claimed.

The ATED related CGT charge will be extended from 6 April 2015 to properties worth more than £1million and will apply to that part of the gain that accrued on or after that date and to properties worth more than £500,000 from 6 April 2016. The balance of the gain will be treated as at present. We are still awaiting further information on the proposals to extend CGT to non-residents (i.e. to individuals and possibly trusts not just corporate owners) who dispose of UK residential property. The proposal was announced in the Autumn Statement and we expect the details shortly. Positive suggestions for the property industry included the announcement of a consultation on the introduction of an SDLT seeding relief for the seeding of property authorised investment funds and consultation on the SDLT treatment of coownership authorised contractual schemes. Whilst any additional relief will no doubt be subject to significant anti-avoidance rules the idea is a helpful step forward for PAIFs. The government will also consult on options to improve the construction industry scheme rules but there is little detail at the moment.

Other significant changes which take effect from April 2014, have already been announced in the Autumn Statement. Most notably the Government again confirmed that it is going ahead with changes to the taxation of mixed member partnerships (those with individual and corporate members) which will impose charges where partnership profits are allocated to a corporate partner where an individual may benefit and where losses are allocated to individual partners to enable the individual to claim loss reliefs. It is also continuing with controversial plans to change the way in which salaried partners of LLPs are taxed. In addition in relation to CGT principal private residence relief - the current rules that automatically treat the final 36 months of ownership of a property as a period of occupation by the owner irrespective of the factual position, provided that the property has been the taxpayer's residence at some point, will be reduced to 18 months from 6 April 2014.

Points of interest arising directly from the Budget include:

  • From Royal Assent of Finance Bill 2014, taxpayers who have used schemes covered by the DOTAS rules or which are counteracted under the GAAR will have to pay the disputed tax upfront rather than waiting until any enquiry/investigation has been completed. This is an extension of the Government's previous announced plans to require upfront payment where a relevant previously decided case has determined that a particular tax scheme does not work.
  • The maximum amount of the annual investment allowance (which is available on expenditure on plant and machinery) will be increased to £500,000 from 1 April 2014 for Corporation Tax and 6 April for Income Tax 2014 until 31 December 15, when it will return to the pre- 1 January 2013 rate of just £25,000.
  • With effect from 19 March 2014 companies will not be able to claim roll-over relief from corporation tax on chargeable gains arising the disposal of tangible assets where the proceeds are reinvested in an intangible fixed asset.
  • The tax advantaged Seed Enterprise Investment Scheme (which helps smaller riskier early stage UK companies raise equity finance) and associated CGT relief for reinvesting chargeable gains in SEIS shares is to be made permanent and will take effect in respect of reinvested gains accruing to individuals in 2014/15 and subsequent years. The Government will also consult on the use of convertible loans in both SEIS and Enterprise Investment Schemes
  • Measures will be introduced in respect of shares issued on or after 6 April 2014 to prevent Venture Capital Trusts returning share capital to investors within 3 years of the end of the accounting period in which the VCT issued the shares
  • The period in which businesses investing in new plant and machinery in ECA sites in EZs can qualify for 100% capital allowances has been extended until 31 March 2020