Property Taxes

Stamp Duty Land Tax, Capital Gains Tax and VAT

There are a number of different taxes which might be of relevance to people who are dealing in property or entering into property transactions. The most common of these will be Stamp Duty, Capital Gains Tax and VAT.

Stamp Duty

Stamp duty is more properly called Stamp Duty Land Tax and is a tax which is charged on the transfer of land or other property whose value depends on land. This can include leases and rights to possession, occupation or use, such as rights of way and easements over another person’s land.

Capital Gains Tax

Capital gains tax is a tax which is charged on the profit that you make from buying something and then selling it at a higher value. In relation to property this is likely to impact developers who buy land and then build and sell houses on that land, or people who purchase derelict properties cheaply and then sell them on after refurbishing.

There are a variety of tax reliefs and allowances which exist for capital gains tax, but these can be extremely technical in nature and so you may require the services of a tax barrister or solicitor to help you claim them effectively.

VAT

VAT may not seem like something which would normally be an issue when buying and selling property, but the tax can be relevant in transactions where a consumer agrees to buy a house on a development site which has not yet been built. In cases such as this, the consumer may be asked to pay a deposit on exchange of contracts, before construction begins.

Because at this time the land is bare it is not zero-rated for the purposes of VAT, so if this deposit is released to the developer to help fund the building project instead of being held by an independent third party, VAT may technically become payable on the sale. This issue has been the subject of a number of court cases and of guidance published by HMRC, and has become extremely complicated. The services of a professional taxation advisor can help to clarify this area of law and ensure that VAT liability is minimised.