The U.K. government will introduce on annual tax on residential real estate valued at more than 2 million pounds ($3.2 million) that’s owned by an offshore company.
The charge will begin in April, the U.K. Treasury said in a draft of the bill today. Owners of homes valued at more than 20 million pounds may have to pay a levy of as much as 140,000 pounds a year, according to the Conservative-led government’s annual budget report in March.
Prime Minister David Cameron targeted the wealthy to pare a record budget deficit by lifting a transaction tax, known as stamp duty, to 7 percent from 5 percent on homes sold for more than 2 million pounds. The government is also introducing capital-gains tax on home sales by non-naturalized owners valued at more than 2 million pounds.
“It is designed to deter high-value residential properties being ‘enveloped’ within a company so as to prevent an opportunity for stamp duty land tax avoidance on future sales,” Sean Randall, real estate tax director at Deloitte LLP, said by e-mail.
Farmhouses valued at more than 2 million pounds and occupied by working farmers will qualify for relief from the new tax, according to the draft legislation. Homes owned by a charity and held for charitable purposes can also gain an exemption.
“Farmers would have been unfairly penalized because there are a number of business benefits to being incorporated,” Knight Frank LLP said on its website.