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Government Cuts Down on Stamp Duty Avoidance
In the past some people have avoided paying Stamp Duty Land Tax (SDLT) by loopholes in the legislation, but in the 2012 Budget speech Chancellor George Osbourne announced the government's intention to crackdown on these loopholes.
Currently, Stamp Duty is imposed on house buyers who more than £125,000 for a property (subject to any existing reliefs). But one loophole enabled wealthy individuals to avoid paying Stamp Duty by setting up a limited liability company to buy the property. The company then immediately sold the property back to the individual, or which pushed up the price when selling on to the next buyer. This is done by the owner selling shares in the company rather than the property itself.
The Chancellor announced a crackdown on this practice by stating purchases over £2m being carried out in this manner will attract a punitive 15% Stamp Duty rate with immediate effect. The Treasury believes that closing the loophole, already exploited by a number of wealthy individuals including celebrities, could raise £65 million a year.
In addition, overseas companies that already own UK residential property worth more than £2m will be subject to Capital Gains Tax (CGT) from April 2013.