The BBC reports that there is a Capital
Gains Tax measure buried in the small print of the Budget which is likely to hit
companies that own buy to let properties.
Individuals who own more than one property - for buy to let or other purposes - pay 40 per cent
CGT on the total the property appreciated when they come to sell it. Companies,
on the other hand, have been allowed to deduct the amount of that price rise
that was due to inflation.
The BBC gives the example that if a
flat was purchased for £100,000 for the purposes of letting out, and was 10
years later sold at £200,000, the individual who owned it would have to pay
£40,000 CGT - that is, of course, 40 per cent of the £100,000 profit.
However, if a company purchased the
same property for £100,000 and inflation had been at three per cent for that
10-year period, inflation would have accounted for £34,000 of that price rise.
Then the company would only pay 40
per cent CGT on the rest of the rise - so it would be 40 per cent on the
remaining £66,000 price rise. Therefore in that case the CGT would be £26,400
rather than £40,000.
However, the BBC reports that it now
appears that from January 2018 that discrepancy will be eliminated.
The change will only affect price
rises from January of next year, so companies will not pay extra on the gains
they have already made.
The BBC says property is not the only
asset this new tax hike affects, but comes on top of a series of measures in
recent years which can be seen as attacks on buy to let.
In the past 18 months, many
individual buy to let landlords have incorporated, setting up
companies owning their investment properties in a bid to reduce the liability
of mortgage interest tax relief, which is being phased out for landlords.
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