Property Tax Changes

Stamp Duty Land Tax
As the property market slumped last summer the Chancellor was forced to announce an increase in the threshold where Stamp Duty Land Tax becomes payable on a property transaction. This threshold was raised from £125,000 to £175,000 for just one year to 2 September 2009. However, as the property market has still not recovered this higher threshold will now remain in place until midnight on 31 December 2009, when presumably the recession will be over!

Stamp Duty Land Tax is a big expense for leaseholders of flats who wish to acquire the freehold of their property from the landlord. The law is to be changed to allow relief from this tax when a group of leaseholders come together to acquire the freehold of the whole block.

Inheritance Tax
The Government has suddenly realised that a number of tax rules that restrict tax relief to land in the UK are against EU law. These rules include the inheritance tax reliefs for agricultural property and woodlands, which until now only applied to land in the UK, the Channel Islands and the Isle of Man.

This inheritance tax relief can now be claimed on any qualifying agricultural land or woodlands situated in a country in the European Economic Area (EEA), which comprise the EU countries and a few more. If inheritance tax has been paid on such non-UK property since 23 April 2003 the executors of the estate can claim a refund.

Furnished Holiday Lettings
Another tax relief that currently only applies to UK property is that for furnished holiday lettings. If the strict conditions apply to the property the letting business is treated as a trade, so losses can be set-off against other income and gains on the property may be rolled-over. HMRC has now been forced to accept that property in other EEA countries can qualify as furnished holiday lettings, and taxpayers will be able to make claims for the associated reliefs where those claim periods are still open. However, rather than expand the scope of this tax relief to the whole of Europe, HMRC are withdrawing the tax relief completely from April 2010.