The new rules for high value dwellings (i.e. worth £2 million or more) owned by nefarious corporate, trust or offshore structures include two main provisions:
1. There is an annual charge aka Mansion Tax Lite as follows:
Over £2 million to £5 million - £15,000
Over £5 million to £10 million - £35,000
Over £10 million to £20 million - £70,000
Over £20 million - £140,000.
In revenue collection terms, this has been a riotous success (£100 million in its first year of operation).
2. From April 2013 onwards, capital gains are liable to 28% tax. There are loads of weird and wonderful reliefs and taper mechanisms for borderline cases, but the most important rule is that the market value of such a dwelling as at April 2013 is deemed to be its base cost, so it is only increases in value since that date which are liable to tax.
So for Provision 1, you want the lowest possible (current) value, but for Provision 2 you want it to have the highest possible value.
What HMRC ought to have done is to operate a "you cut, I choose" principle and allow people to report any value they like (within reason). They then pay (say) the 0.7% annual charge for that year, but are locked in to that value when it comes to calculating the April 2013 value on a future sale.
In fact, there's no reason why people can't self-assess every year, so if a company is thinking of selling such a dwelling in the next couple of years, it will happily report a value equivalent to what they hope to sell it for - for every £1 the reported value increases, they pay an extra 0.7p in tax each year but save 28p capital gains tax.
The 15% Stamp Duty Land Tax charge on the way in is spiteful and pointless of course (seeing as you can still avoid all SDLT in future by selling the company instead of the company selling the dwelling), it would be far better to bump up the 0.7% annual charge rate (or the 28% capital gains tax rate) accordingly to arrive at some sort of optimum revenue figure.
The same applies to the £30,000 or £50,000 per person annual charge for non-domiciles who don't want to report and pay tax on their world-wide income. Only about 5,000 people pay it each year so they could get rid of that and add it to the ATED charge as well.
Debate Magazine
