Changes to tax on UK property and statutory residence rules are set to come into force this year. The draft statutory residence test rules have also been published which will be introduced from 6 April 2013. Karen Marks, partner at private client legal practice and advisory firm New Quadrant Partners in London points out that there are a number of day counting tests and conditions that need to be analysed in order to ascertain a person’s residence status. The rules are complex but at present, the draft rules introduce three strands to the test, explains Marks. "First, automatic overseas test to ascertain if the individual is definitely not UK resident; secondly automatic residence test to ascertain if the individual is definitely UK resident. Third, a sufficient ties test to ascertain the individual’s status if they are neither automatically UK resident nor not UK resident."
Marks adds: “As there are lots of different day count tests and key factors which need to be considered as they relate to each individual case, a thorough analysis of the rules must be undertaken. At present, the rules are in draft, once the rules are introduced it will be essential to read and apply the rules carefully to each case and not rely on summaries (even detailed ones) as the tests need to be analysed exactly.”
In terms of the proposed taxation of high value residential property, Marks says that while the draft Finance Bill was published in December 2012, not all the draft clauses have yet been made available and further changes may be made before the Bill is passed in April 2013.
“An annual residential property tax (APRT) will be levied on residential properties valued over £2m owned by non-natural entities including companies. Certain non-natural entities will be exempt from the charge including companies acquiring and holding property for the purpose of rental to third parties on a commercial basis. Similar reliefs will also apply to the 15% Stamp Duty Land Tax (SDLT) on the purchase of properties valued at over £2m by companies,” she explains.
According to Marks, the charge does appear to be less punitive than originally set out as the tax will only be charged on the increase in value on or after 6 April 2013.
“This means that properties will effectively be rebased to their April 2013 value. The CGT rate will be 28% with a taper relief for properties close to the £2m threshold standing at a large gain. Certain companies will be relieved from the charge.”