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Finance Act 2014

Background Note

9.Schedule 4A Finance Act 2003 provides for the 15 per cent higher rate charge to SDLT.  This charge applies to acquisitions of a ‘higher threshold interest’ by a ‘non-natural person’ – that is, a company, a partnership with a corporate member or a collective investment scheme. A ‘higher threshold interest’ is defined as an interest in a single dwelling (together with appurtenant rights) to which chargeable consideration of more than £2,000,000 is attributable.  This section reduces the threshold to £500,000.

10.The 15 per cent higher rate charge was introduced in Finance Act 2012 as part of a package of measures affecting residential property wrapped in corporate and other ‘envelopes’, which is not used for a commercial purpose.  The other measures in the package are the Annual Tax on Enveloped Dwellings (ATED) and ATED-related Capital Gains Tax on disposal of property that was subject to ATED.

11.Acquisitions by trustees or for the purposes of letting, trading or redevelopment, trades involving making a dwelling available to the public, providing dwellings for occupation by certain employees or use as a farmhouse are excluded from the higher rate charge.

12.This section and the related changes to the ATED threshold (sections 109-110) are intended  to tackle tax avoidance and to ensure that those wrapping residential property in corporate and other ‘envelopes’ and not using them for a commercial purpose, such as renting them out, pay a fair share of tax.

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