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Proposed new tax on high-value residential property transactions

27 March 2008

On 17 December 2007 the government issued a consultation document on transfers of “high-value” (£1 million or more) residential property using special purpose vehicles (“SPVs”).

The transactions potentially affected are those where an SPV owns a property and a purchaser buys the shares in the SPV from the seller rather than buying the property itself, meaning that the purchaser pays stamp duty at 0.5% on the value of the SPV’s shares rather than SDLT at 4% on the value of the property.

The government is consulting on bringing in an “indirect charge” in circumstances where a purchaser acquires a “substantial interest” (at least 75%) in a company (the SPV) which is in “limited ownership” (controlled by 5 or less persons) and which is a property company (90% of the SPV’s assets are property).

The purchaser will have an effective tax liability of 4.5% (0.5% on the shares and 4% on the property). The consultation has just closed and a further announcement is
expected in the 2008 Budget.

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Tom Wilde

Solicitor
T: 08700 86 8713
I: +44 (0)118 965 8713
E: tom.wilde@shoosmiths.co.uk