Discussion of a so called mansion or wealth tax is a hot topic among private wealth practitioners at present. The media is abuzz with howls of outrage in respect of high value residential property.
There appears to be a view in some political quarters that the mansion tax is part of the solution to these perceived problems (although the fact that this measure would potentially increase pressure on values below the level at which any such tax were to be implemented seems not to have been considered). This blog comes with a health warning – nothing has yet been formally announced!
It is important to note that there are no firm proposals from the current government to introduce a mansion tax and whether a form of mansion tax is introduced or not would appear to depend largely on who wins the 2015 election (Labour and the Liberal Democrats are largely in favour and the Conservatives seem generally opposed).
Read more on Mansion Tax from Spear’s
A number of articles providing a broad brush indication of what any such tax would look like have appeared in the national press and have enabled practitioners to get a sense of what a new landscape may look like.
The initial proposal was for a flat tax of 1 per cent on the excess value over £2 million for residential property. However, the concept of a tax on ownership rather than income or profit has led to much discussion, not least as a result of the requirement to revalue a large number of properties to determine in respect of which the new tax would be payable.
In any event, ideological objections aside, if introduced the taxation of residential property in England and Wales would become extremely complex – SDLT, ATED, CGT, council tax and a potential mansion tax may be too complicated even for Westminster.
More recent press reports have indicated that the Liberal Democrats favour an increased level of council tax for higher value properties which fundamentally alters the proposition and moves away from a percentage levy to a (one would imagine) more palatable proposal although Labour has yet to comment on this new approach. Comment from the industry on this proposal has been generally more favourable than that on a new mansion tax.
After many years of stasis the more recent past has seen upheaval in the taxation of residential property. Whether a mansion tax in any form comes to pass remains to be seen but it certainly seems that politicians are not done tinkering with the taxation of residential property.
Edward Burton specialises in advising on prime and super prime residential property at boutique private wealth law firm Maurice Turnor Gardner LLP