From a property perspective, Budget 2012 was, in the main, about combating perceived tax avoidance; though there were some measures intended to help business.

As expected, the Chancellor closed down stamp duty land tax (“SDLT”) sub-sale schemes involving the grant or assignment of options and, as was mooted immediately prior to the budget, imposed a 7% SDLT band for high value residential property (worth more than £2 million). 

The extent of the Chancellor’s attack on the enveloping of high value residential property in a corporate wrapper was more of a surprise; and structures incorporating corporate vehicles (and other entities) which own UK residential property will need to be reviewed once the detailed rules are available.  It remains to be seen whether the consultation on the extension of the capital gains tax regime to gains made by non-resident non-natural persons on the disposal of UK residential property fuels the debate as to whether all non-residents should be subject to tax on UK real property gains.

The more significant property related measures are summarised below.



A package of measures has been introduced, signalling the Government’s resolve to attack “unacceptable” SDLT avoidance.

7% rate for purchases of high-value residential property by individuals

  • A new 7% SDLT rate now applies on the purchase of residential property where the chargeable consideration is more than £2 million.
  • Transitional provisions ensure, broadly, that the old rates continue to apply to contracts entered into before 22 March 2012 which are completed on or after that date. 
  • The existing rates will continue to apply to properties where the chargeable consideration is not more than £2 million.

15% rate for purchases of high-value residential property by non-natural persons

  • A new rate of 15% SDLT now applies to the purchase of residential properties by certain types of non-natural persons where the chargeable consideration is more than £2 million.
  • Transitional rules will apply where the contract was completed and signed by all the parties on or before 21 March 2012.
  • Non-natural persons include companies, collective investment schemes (including unit trusts) and partnerships that include a non-natural person as a partner. There is no indication of which types of non-natural person will be caught by this new rate although property developers and corporate trustees will be excluded from the charge in certain (yet to be identified) circumstances.
  • This change, combined with the proposed annual charge on high-value residential properties owned by non-natural persons, will require a review of existing structures which utilise corporate vehicles to hold UK residential property.   

Sub-sale relief

  • A particular SDLT sub-sale scheme involving the grant or assignment of options has been closed down.  The Government is to consult more generally on addressing SDLT anti-avoidance through the use of sub-sale relief.  But whilst HMRC may take a greater interest in avoidance schemes that utilise sub-sale relief, its use in bona fide commercial transactions is not under threat.


  • The Government has also stated that, with immediate effect, it will take action to close down future SDLT avoidance schemes.  The implication here is that such changes could have retrospective effect.
  • In addition, the proposed general anti-avoidance rule (“GAAR”) will now also apply to SDLT and certain amendments have been made to the rules requiring the disclosure of SDLT avoidance schemes.

Lease simplification

There is to be consultation on simplifying the rules that apply to lease arrangements involving (i) abnormal rent increases, (ii) the substantial completion of an agreement for lease; or (iii) a lease that continues after a fixed term. Legislation will follow to be included in the Finance Bill 2013.

Abolition of SDLT disadvantaged areas relief

SDLT relief for disadvantaged areas will be abolished from 6 April 2013.

Direct Tax avoidance

There are further direct tax anti-avoidance measures intended to attack offshore companies holding interests in UK residential property.

Proposed annual charge on high-value residential properties owned by non-natural persons

  • The government will consult on proposals to introduce an annual charge (with effect from April 2013) on residential properties valued at over £2 million that are owned by certain non-natural persons. There is currently no indication as to which types of non-natural person are to be caught by the proposed charge or how the monies will be collected.

Capital gains tax regime to extend to disposal of residential property owned by non-natural persons

  • The capital gains tax regime is to be extended to gains made by non-resident, non-natural persons on the disposal of UK residential property and “shares or interests in such property” (again with effect from April 2013).  The government will consult on the details of this measure in conjunction with the proposed SDLT annual charge mentioned above.

Property related income tax anti-avoidance measures

On 13 March 2012, the government announced two property related income tax anti-avoidance measures, both with immediate effect:

  • Agricultural property loss relief will be denied for certain expenses related to agricultural land incurred with a main purpose of tax avoidance.
  • Post-cessation property business tax relief will be denied for expenses of a property business incurred with a main purpose of tax avoidance.

Capital allowances

Capital allowances: fixtures

The government has reaffirmed its announcement that, from April 2012, the availability of capital allowances to a purchaser of fixtures will be conditional on businesses following a new statutory mechanism for fixing a value for fixtures within two years of a sale. A technical amendment to the legislation will also enable plant and machinery capital allowances to be claimed by a new owner on any fixtures expenditure that has not been relieved under the Business Premises Renovation Allowance scheme (which scheme will be extended for another five years until April 2017).

For information on the issues that need to be considered when drafting or negotiating a clause in a property sale contract dealing with plant and machinery capital allowances, please contact us for further information.


  • The government has announced that enhanced (100% first year) capital allowances will be available from 1 April 2012 for designated sites in The London Royal Docks Enterprise Zone, the Enterprise Zones in Irvine, Nigg and Dundee in Scotland and in Deeside, North Wales.
  • Enhanced capital allowances will not be available on plant and machinery for which Feed in Tariffs (FITs) and Renewable Heat Incentives (RHIs) are received from April 2012.
  • Solar panels are designated as Special Rate pool expenditure (8% per annum) from April 2012.
  • The list of designated energy saving and water efficient technologies which qualify for enhances capital allowances is to be updated in Summer 2012.
  • From April 2013 first year tax credits for expenditure on certain environmentally beneficial plant and machinery that generates a loss are extended for a further 5 years to April 2018.


  • The government has announced that it intends to correct a number of anomalies along the “borderlines” of certain VAT exemptions and VAT zero-ratings. As part of this exercise, the government has launched a consultation, seeking views on these anomalies and the proposals for dealing with them.
  • The measures that are of particular interest to the property industry relate to self-storage, alterations to listed buildings, hairdressers’ chair rental and holiday caravans.


  • In addition to the relaxation of a number of the requirements of the Real Estate Investment Trust (REITs) regime to be implemented in Finance Bill 2012, consultations will begin on changes to the REIT regime in relation to:
    • the role that REITs can play in supporting the social housing sector; and
    • whether to change the treatment of income received by a REIT when it invests in another REIT.


The government has announced that the restrictions on trading hours, which apply to large shops, will be relaxed during the London 2012 Olympic and Paralympic Games to allow retailers to make the most of trading opportunities.



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