Tax (property) Flashcards
Stamp duty land tax - general
Paid by buyer
Must be sent within 14 calendar days of completion when person buys or leases land (irrespective of whether any SDLT is actually due)
Consideration given for property exceeds applicable SDLT threshold => buyer must also pay the SDLT due to HMRC in the same 14 days period
Tax calculated on VAT-inclusive amount of purchase price of land
Stamp duty land tax - exempt transactions
Property transferred as a gift
Property transferred to a spouse
Property transferred to a former spouse upon divorce
Property transferred under a variation of a will changing the B entitled to the property within 2 years of the decedent’s death
Stamp duty land tax - late penalties
Interest may be charged if SDLT is paid late (or form submitted late)
Thresholds and rates of SDLT - freehold
Depend on whether property purchased is residential or commercial
- Each type of properyt has a nil rate band (change frequently)
- Tiered tax, with rate of each tier being applicable to the consideration paid for the property that falls within the tier
Additional charge for additional residential purchases
- Already owns residential property and buys additional => additional 3% charged in each band
- Not charged for transactions under £40k
- Do not apply if new property replaces the purchaser’s only or main residence
Thresholds and rates of SDLT - leases
Tax may be payable on either or both of any leases premium paid (ie up front) and the net present value of the rent payable to the LL over the entire lease term
Tax for each part calculated separately
Rates on lease premiums are same as above, but rates on net present value of the rent are lower
SDLT reliefs
- Relief for purchase of first residence
- For consideration up to £625k
- 0% up to and incl £425k, 5% on any remainder (up to the £625k)
- Exceeds £625k => no relief given and usual rates apply - Linked transactions (ie buying more than 1 residential property)
=> may opt to pay tax based on teh mean (average) consideration rather than by the sum of the aggregate - Six or more residential properties bought in a single transaction
- Purchaser can choose to apply non-residential property rates instead (which are lower than residential)
VAT - what is a taxable supply
=
1. For consideration
2. Supply of goods or services
3. Made by a taxable person
4. In the UK
5. In the course or furtherance of the taxable person’s business
6. Must not be exempt from tax
VAT - charge to VAT
Tax charged on the ‘value of the supply’ (defined widely)
Standard = 20%
Zero-rated supply (ie 0% tax) = food (unless catering), books and newspapers, water and sewerage services, transport, and residential construction
Exempt = LIFE HP (land, insurance, financial services, education, health services, postal services)
Outside scope of VAT = BSc (sale of a business and sale of shares of a company)
VAT - option to tax
Lease or sale of land normally an exempt supply for VAT, but owners of interest in commercial land and buildings may opt to charge VAT
Allows them to recover input tax
Applied =>
- Standard rate (20%) must be charged on the sale of lease of the property
- Any inputs the owner pays in connection with the supply may be recovered, incl heating costs, cleaning and repairs
- Relates to ind land/buildings (not to all land/buildings owned by the person opting to tax) BUT if made, applies to whole building (=> poss problems where several tenants)
Imp to distinguish construction of commercial buildings
- Contract to supply (ie construct) new commercial building is taxed to the standard 20% rate
Revocation of option to tax
If taxpayer changes mind within 6 month (provided option has not been put into practice (eg by charging rent exclusive of VAT))
May also be revoked after 20 years with consent of HMRC
Option to tax made by the owner of land/building and does not transfer with the land/building on any future disposal
CGT - general
CGT = profit realised when a capital asset is disposed of
Capital gain = Proceeds of sale (or market value) - costs of acquisition
Calculating CGT
Annual exemption amount
- Available to everyone and changes every year (approx £3k)
Rate of CGT
- Ind pays income tax at higher or dividend upper rates (/additional) => CGT rate is 20%
- Otherwise 10% (to the extent that they do not exceed the ind’s unused income tax basic rate band, or 20% to the extent they do exceed that amount)
- Unused basic rate band = amount of basic rate band remaining after an ind’s income has been taxed
Gains from residential property
=> 10% and 20% rates increase to 18% and 28%
- Applies to gains on UK and overseas property
- Exemption should be set against residential property gains in priority, as these would otherwise be taxed at a higher rate
CGT reliefs relevant to property
Private residence relief (PRR)
= Exempts all or part of gain which arises on a property which an ind has used as their home
Reduces capital gain rather than deferring it to later date
Calculated by: gain x (period of occupation of property/period of ownership)
- Ie if taxpayer has lived at property entire period of ownership => 100% of gain is exempt and no gain is chargeable
- => Gain only arise if absent from home for period (but even then may still be deemed occupation)
Deemed occupation if:
1. Last 9 months of ownership
- Regardless of whether taxpayer living there
- Only condition = taxpayer must have occupied the property as their home at some time
- Periods between actual occupation
- 3 periods qualify =
a) Any absence for any reason up to 3 years
b) Where owner is abroad by reason of his employment (period is unlimited)
c) Where owner was absent from property due to working elsewhere (as employee or self-employed trader) - max 4 years
- Above periods can apply cumulatively
