VAT - anomalies and loopholes
Legislation will be introduced to address long-standing VAT anomalies and loopholes, with effect from 1 October 2012. The changes are:
- applying VAT to approved alterations to listed buildings to bring them into line with the VAT treatment of alterations to non-listed buildings, and repairs and maintenance for all buildings
- providing consistency of treatment between self-storage and other forms of storage
- applying VAT, in the minority of cases where it does not already apply, to hot food and to sports drinks
- putting beyond doubt the fact that VAT applies to the rental of hairdressers’ chairs
- ensuring that the purchase of holiday caravans is taxed consistently at the standard rate.
Stamp duty land tax (SDLT)
A new rate of 7% will be introduced where the chargeable consideration for a residential property is more than £2 million. This will have effect where the effective date (normally the date of completion) is on or after 22 March 2012, unless the contract was entered into before that date.
An even higher rate of 15% will apply to such residential properties if the purchaser is a ‘non natural person’, for example a company. This will have effect where the effective date of the transaction is on or after 21 March 2012.
In addition the Government will consult on the introduction of:
- an SDLT annual charge where properties over £2 million are owned by non natural persons
- a CGT charge on residential property owned by non resident, non natural persons.
Both these measures will apply from April 2013.
Comment
The intention of the 15% charge is to stop or reduce the number of schemes which claim to allow a property to be transferred without SDLT. The charges to be introduced in 2013 are aimed at charging properties already in companies which are used as residential accommodation.
General anti-abuse rule (GAAR)
The Government commissioned an independent report from a leading tax lawyer on whether or not it would be appropriate to introduce a GAAR into the UK tax system.
The reviewer recommended that a moderate rule targeted at abusive arrangements would be beneficial to the UK tax system. Such a GAAR would apply for income tax, CGT, corporation tax and NIC. It would not apply to ‘responsible tax planning’.
The Government accepts the recommendation and will consult this year with a view to legislation being introduced in Finance Bill 2013. It will extend the GAAR to SDLT.
Comment
This is a route that has been used in a number of other countries.
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