Dwellings held in corporate structures

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First appeared in Informer: Real Estate Newsletter - Spring/Summer 2014

Dwellings held by offshore companies and unit trusts (for occupation by the ultimate owner or family members) worth no more than £2m have, until now, escaped liability for ATED, the new CGT and the 15% of SDLT.  By way of reminder, ATED stands for Annual Tax on Enveloped Buildings.  It first applied from 1 April 2013 and is an annual tax paid on high value dwellings based in the UK and which are owned by corporate structures. 

In the 2014 Budget, the 15% rate of SDLT was extended to the purchase of a dwelling by a corporate body for more than £500,000 (with protection for existing contracts).  ATED and the new CGT will be extended to dwellings worth over £1m from 1 April 2014 and over £500,000 from 1 April 2016.

The lowering of these thresholds inevitably means that more dwellings held in corporate structures should be considered for de-enveloping.  For dwellings worth no more than £500,000, the cost of maintaining a corporate structure will probably outweigh the tax advantages.  In future we are likely to see far few dwellings held in this way, except where the IHT advantages are of paramount importance.

For further information on these changes or any other tax issues, please contact Nick Beecham.

Nick Beecham, Partner, Tax and Structuring Group