This briefing note is only intended as a general statement of the law and no action should be taken in reliance on it without specific legal advice.

REAL INSIGHTS - Property Update - January 2015
30 January 2015

REAL INSIGHTS - Property Update - January 2015


On Wednesday 21 January, Mishcon de Reya held a breakfast seminar on high value residential property. Guests at the full capacity event included developers, agents, valuers, banks, wealth managers and other industry professionals.

The panel provided a timely update on the changes announced in the Chancellor's Autumn Statement as well as covering a number of significant developments in the planning policies of several London boroughs, which have consequences for prime residential development.

Real Estate Partner Susan Freeman chaired the event with our Head of Real Estate Taxation, Jonathan Legg and Head of Planning, Daniel Farrand explaining how to navigate the new landscape. Our Guest Panellist, residential property expert Henry Pryor, offered his perspective on how these changes might affect the market. 

Click here for a note on the speakers' presentations.


It will usually be sensible for most UK resident and domiciled individuals to own their homes personally from a purely tax perspective (most people will be more concerned about ensuring that they can claim the valuable principal private residence exemption from CGT when they sell their homes).  However, for (i) UK resident, non-domiciled individuals and (ii) non-UK residents the choice is much less straightforward.  There is no "right answer"– it is simply a case of assessing all of the relevant taxes and considering the pros and cons of each.  And the use of the property will impact on the UK tax position – a holding structure which is suitable for a property which is held as an investment and rented out may be quite unsuitable for someone who plans to use the property as their home in the UK.

Clearly the rules introduced in 2012/13 will have an impact.  For certain types of company buyer, these introduced (i) the Annual Tax on Enveloped Dwellings ("ATED"); (ii) ATED-related CGT; and (iii) a super rate of 15% Stamp Duty Land Tax.  However, different clients have different priorities, and some clients will be happy to pay higher transaction taxes/the ATED if it protects them from a 40% Inheritance Tax charge in the event of death.  And of course any buyer who avoids the 15% rate of SDLT will still be stung by the new top rate of 12% (to the extent the price is over £1.5m) – so ultimately SDLT will be significant cost on the acquisition of high value residential property whoever the buyer is.

So there is no one answer to the question posed at the beginning of this piece – personal ownership, trust ownership or company ownership may each be suitable for different clients, depending on the their individual tax profile, the type and value of the property and its use.

Jonathan Legg is a Partner and Head of Real Estate Taxation.


On 28 November, the vacant building credit, a new affordable housing relief for the conversion or redevelopment of vacant buildings, was inserted into national planning practice guidance. Councils and developers are now beginning to see the consequences. Where vacant buildings are redeveloped for residential use, the government advises that contributions to fund affordable housing provision should only be sought on any uplift in floorspace. 

So a scheme which adds an extra floor to a building for a penthouse as part of the conversion will only have to contribute to affordable housing for that extra floor, while schemes which add no new space will not have to contribute at all. The initiative is aimed at bringing disused buildings back into use, but it has upset a number of councils who risk losing employment space for high end residential without getting anything for it. This is a contrast with community infrastructure levy (CIL) which actively disincentivises reuse of long-empty buildings.

Councils in central London, where this type of conversion is prevalent, are now seeking advice on the credit. The status of planning practice guidance in the planning policy hierarchy may lead some to insist that the affordable housing requirements in their development plan still take precedence. Given the potential sums involved for large developments, it is only a matter of time before it is worth someone's while to test that approach on appeal or in the courts.

Daniel Farrand is an Associate and Joint Head of Planning and Environment.


For many real estate lawyers, the afternoon and evening of 3 December 2014 were spent rushing around trying to exchange multiple high value residential deals for high net worth (HNW) clients before the midnight deadline to lock in the 'old' 7% residential SDLT (stamp duty land tax) rate.

The new 'slice' system means that buyers of properties up to £937,000 will now pay less tax. The other headline-grabbing aspect is the 12% top rate on the slice of the purchase price above £1.5m. When set against the opposition's plans for a 'mansion tax' on homes over £2m, it's clear that the tax treatment of high-end residential property will be a key issue in the forthcoming election campaign.

So, what have we seen in practice since the new rates came into force? 

  1. HNWs have not stopped buying high value residential. While a small number of buyers in the £2m-£5m bracket (mainly wealthy professionals) chose to rethink their planned purchases, countless others ploughed ahead regardless. Where some continue to sense uncertainty and nervousness from the impending general election and the prospect of a mansion tax, others see value and opportunity. Those buying properties in excess of £5m have not evidenced much concern for the SDLT increase.  Our experience suggests that HNWs care more about their disposal tax than their purchase tax and many still enjoy the comfort of private residence relief from capital gains tax (CGT).
  2. Increasing numbers of HNWs are looking to invest in commercial property. Lower purchase costs and a desire for higher yields and a more balanced portfolio are some of the reasons cited. Some have chosen London office investments (possibly for their residential conversion potential), while other yield hunters have turned their gaze towards Manchester and other key regional cities. 

HNW interest in commercial property investments is not new but perhaps the shake-up in the residential SDLT regime, the prospect of a mansion tax under a Labour government, the ATED ('annual tax on enveloped dwellings') and now CGT on residential property for non-residents are all serving as catalysts for the increased interest we are seeing.

Simon Chadowitz is an Associate in our Real Estate Department.