Corporation Tax (payable by SPVs)
With Property Partner, your investment in property is made through a UK Limited Company, via the purchase of an interest in shares. This is called a Special Purpose Vehicle “SPV”, which is established specifically for purchasing that individual property.
The taxable profit made by the SPV is subject to corporation tax, which the SPV will pay directly to the UK tax authority, HMRC. The Corporation Tax rate in the UK is currently 19%, as at May 2018.
In addition, should the property price increase, Corporation Tax is payable on the gain on disposal. This future Corporation Tax liability is recognised in the valuation of the SPV and is called Deferred Tax.
For example, if the property valuation increased by £10,000 over a 5 year period, then £1,900 (£10,000 x 19%) would be recognised as a Deferred Tax liability, which in turn is reflected in the estimated value that we publish for that property’s shares on the platform.
Recognising Deferred Tax is important for ensuring that the investors who have benefited from any property price increases are the same investors that incur the related Corporation Tax.
Stamp Duty Land Tax (payable by SPVs)
Following the March 2016 budget, purchases of a second residential property in England, Northern Ireland or Wales are subject to an additional 3% Stamp Duty Land Tax (“SDLT”). In the case of companies and non-individuals (such as our SPVs) first purchases of such properties are also subject to the additional 3% Stamp Duty Land Tax. There are no exemptions. However, if we are acquiring more than 6 units we also have an option to elect SDLT for non residential and mixed use land and property rates. This typically applies to commercial property but can be adopted for residential property in certain circumstances i.e. if purchasing more than 6 units in a transaction.
We provide all our investors with tax statements, which can be accessed in the Portfolio section of the Property Partner platform. These are to assist you with any tax returns, and provide a summary of dividends received and capital gains generated over a specified period. The tax statement does not include promotional income such as cashback
Please note that tax rates are subject to future change, and the above does not constitute tax advice.