In Autumn Budget 2021 the government announced that it will add a clause to a future Finance Act enabling it to change stamp duty rates on securitizations and insurance-linked securities by means of secondary legislation.
In November 2021, the government published a summary of responses to a consultation exercise in March 2021. The consultation explored proposed changes to clarify and/or reform certain aspects of the taxation of securitization companies, as well as the stamp duty exemption for bank loans used for corporate or personal securitization.
The government also published 2 draft statutory instruments, which are designed to control how the law is applied in certain areas, along with a summary of responses to a consultation and draft explanatory memoranda and tax information and impact notes. The summary of responses showed that the government had decided to go ahead with the changes to tax law that were included in the consultation. The draft statutory instruments and draft memoranda and impact notes closed for consultation on 10 January 2022
This draft statutory instrument updates the tax rules in relation to securitization and insurance-linked securities arrangements. It provides an exemption from Stamp Duty, as well as a reduction in cost and complexity, by allowing the standard notes issued in these arrangements to be transferred tax-free. The instrument will be made under the enabling power taken in the Finance Bill 2021 to 2022
Now, you may have a couple of questions about this. We understand if this is a lot to take in all at once. This is why we thought it would be useful to put together a brief discussion on this subject. If you want to learn more about this, read on for a brief run-through of securitisation and insurance-linked securities.
Stamp Duty Land Tax Consultation
The government has published a consultation on possible changes to two areas of Stamp Duty Land Tax, and they are seeking feedback on the proposed changes. Here are the areas that may be affected by the possible changes:
The tax rules for calculating the tax on the purchase of non-residential property, namely property that does not qualify for a real estate tax exemption.
If you purchase two or more dwellings, you may be eligible for tax relief relating to your other homes under Multiple Dwellings Relief.
The background to these changes is that some purchasers are using the rules to unfairly reduce their liability for Stamp Duty Land Tax. While HM Revenue and Customs have a good track record of getting their cases successfully before the tribunal, the changes outlined in these proposals would make the system fairer for everyone.
Take note that the consultations will end on February 22, 2022, so be sure to let your voice be heard on or before that date. If you would like to discuss your view, reach out and send an email to [email protected].
Stamp Duty Land Tax and Freeports
The new tax site designation orders will be effective from the day they are issued and will be valid until 30 September 2026. This means that purchases of land and buildings in these areas from the day a deed comes into effect until 30 September 2026 might be eligible for Stamp Duty Land Tax relief if you meet the criteria. Find guidance on these criteria and more information about relief. For details on how to claim relief on freeport goods, see the guidance on making a return. Remember to complete question 9 on the return form with code 36 for relief for freeports.
Stamp Duty Land Tax Temporary Rates
On October 1, 2021, the residential nil rate band for England and Northern Ireland returned to normal levels. The temporary increase ended on September 30, 2021:
£500,000 for the period 8 July 2020 to 30 June 2021
£250,000 for the period 1 July 2021 to 30 September 2021
Capital Gains Tax Payment for Property Disposal Service
The government announced two changes to the Capital Gains Tax and Payment of Property Disposals service rules at the recent Budget.
People who are individuals, are trustees of deceased persons, or are personal representatives of the deceased will now have 60 more days than before to report and pay any tax due on UK land and property disposals. If a property changes hands and results in a capital gain, the disposal is taxable. Thus, the new owner should take note that they have 60 days from the completion date to report and pay their tax liability. Conversely, if a property is disposed of before this date, the disposal is not taxable.
The government has listened closely to feedback from stakeholders about their experience with the Payment of Property Disposals service and has noted a recommendation included in the second report published by the Office of Tax Simplification: Simplifying Capital Gains Tax. As a result, the government has decided to extend the time to submit forms to 60 days. This will give customers more time to produce and provide accurate figures, as well as just enough time to engage with tax advisers.
The UK has also announced new rules clarifying what gain is taxable in situations where a property with both residential and commercial properties has been sold. Where gains occur in relation to a mixed-use property, the portion of the gain that is considered residential property gain is taxable. A mixed-use property is defined as one that has both residential and non-residential elements.
We hope this article proves to be useful when it comes to furthering your understanding of these changes. We understand if this is still rather confusing as it is a lot of information to take in all at once. Feel free to look back on this guide if you need a quick refresher on this subject. Be sure to use what you learned here as a reference to make the most informed decisions that will allow you to effectively navigate property sales and purchases.
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