CGT and SDLT changes for offshore companies in the 2012 Budget

The big changes in the budget as they relate to using offshore companies owning UK property are: SDLT For anyone buying UK property via a non resident, "non natural person" (ie an offshore company) there will be a special SDLT charge of 15% where the property costs more than £2M. This applies from 21 March 2012 (subject to transitional rules). In addition, there will be consultations on the introduction of an annual charge on residential properties valued over £2 million already owned by offshore companies, with the intention that the measure will come into effect in April 2013. There will be a general 7% SDLT charge on the acquisition of residential properties over £2 million from 22 March 2012 (ie an increase in the rate by 2%). CGT They are consulting on changes from April 2013 to the tax treatment of non resident "non natural persons" owning UK property and shares or interests in such property. Again this is targeted at offshore companies owning UK property and will look to bring these within the CGT regime. Comment It's interesting that they are targetting the supposed avoidance of SDLT through offshore companies owning UK property. The most common tax planning reason for using an offshore company to hold UK property is for non doms to hold UK property free of inheritance tax. In these cases SDLT planning is not really an issue as there would be a transfer of an existing property into the company so that SDLT would be payable in any event. In terms of bringing offshore companies within the scope of CGT, in most cases they are anyway (at least in practice) as the gains of the offshore company are attributed to UK resident shareholders where they are then subject to CGT at a personal level. Therefore the supposed advantages in using an offshore company for SDLT and CGT planning are often more apparent than real - at least for UK resident domiciliaries. In fact even if property was held personally in many cases there wouldn't be a CGT charge anyway (either due to PPR relief or if the owner was non resident). There are also disadvantages to holding property via a company (such as the potential benefit in kind charge if there is any occupation by directors or their family). We'll need to wait for the detail, but the IHT advantages for non doms looks as though they will still remain.