Property Tax Insider Monthly Newsletter

The Grenfell Tower tragedy was horrific, and the disaster forced the government to prioritise the end of unsafe cladding. As a result of this the government is proposing a new time limited residential property developer tax (RPDT).

Meg Saksida considers where the impact of the proposed residential property development tax will be felt.

It can be highly tax-efficient to buy commercial property through a pension fund. This is a popular and financially effective option among small business owners who choose to purchase their business premises through their pension scheme to take advantage of the tax breaks on offer and to ensure that they, rather than a third-party landlord, benefit from the rent paid on the property.

Sarah Bradford explores the tax advantages of buying a commercial property through a self-invested personal pension plan or a small, self-administered scheme. 

The UK does fare well as regards capital investment. Apparently, the World Bank put the UK 104th out of 129 countries for capital investment in 2020 (as a percentage of GDP). In (out of?) Europe, we came fifth-last. 

Lee Sharpe looks at the new super-deduction for capital allowances purposes, points out where investors need to be careful with the new rules, and suggests the real reason why it was introduced. 

The family home is the most valuable asset in the death estates of many individuals and could trap some homeowners in the inheritance tax (IHT) net. 

Mark McLaughlin looks at when a qualifying property is ‘inherited’ and ‘closely inherited’ for inheritance tax residence nil rate band purposes.

The question often arises: where do the grounds of a property end, and a field or other kind of land begin? What exactly are 'garden and grounds', and how large are they able to be and still achieve main residence relief for the owner?

Meg Saksida explains the area of land considered as 'garden and grounds' for capital gains tax main residence relief and when this can be challenged.

Rent-a-room relief enables an individual to earn up to £7,500 a year tax-free from letting out a furnished room or rooms in their home. They do not need to be a homeowner to benefit – the relief is also available for letting out rooms in a rental property (although the landlord's consent may be needed to sublet). 

Sarah Bradford looks at rent-a-room relief and asks if a claim is always worthwhile.

Buying a home (in England and Northern Ireland) can be expensive for stamp duty land tax (SDLT) purposes. The top rate of SDLT for residential properties is 12% (NB the rates are increased by 3% for purchases of additional residential properties and by 2% for purchases by non-UK residents).

Mark McLaughlin looks at stamp duty land tax multiple dwellings relief, and houses with 'granny flats.'

In the previous case study, Lee Sharpe looked at what might happen if a landlord or landlady were to decide to develop their rental property for onward sale; and warned that, in some relatively common situations, a rather nasty immediate capital gains tax (CGT) 'deemed disposal' might arise, and income tax might be charged on the development phase.

In this issue, Lee looks at circumstances involving the sale of land or property for development – so-called 'slice of the action' arrangements.

It does not matter whether a landlord is using the cash basis or the accruals basis; the initial purchase of domestic items and furnishings in a residential property is not available to be offset against the landlord’s rental income for tax purposes. This is confusing for many landlords, who can sometimes incorrectly assume that all purchases used ‘wholly and exclusively’ for the property are tax-deductible. 

Meg Saksida goes back to basics and explains this important relief for residential property landlords.

Over the last few case studies, I have looked at introducing property into the property business and the implications of updating, repairing and adapting property for its intended use. 

Lee Sharpe looks at the tax position on the removal of a property from the property business.

When a couple separate or divorce, this usually results in a change in the couple’s living arrangements. The marital home may be sold, with both parties buying new homes from their share of the proceeds; or one party may decide to remain in the marital home, buying the other party out. 

Sarah Bradford examines the capital gains tax implications of a sale or transfer of the marital home on separation or divorce.

A higher rate of stamp duty land tax (SDLT) applies (in England and Northern Ireland) to acquisitions involving a ‘higher threshold interest’ by a company (among others). This is broadly an interest in a single dwelling costing more than £500,000. The SDLT rate in such circumstances is 15% (FA 2003, Sch 4A, para 3). 

Mark McLaughlin looks at a case on an important exception from the higher rate of stamp duty land tax.