House of Secrets: Who Owns London's Most Expensive Mansion? • Hacker News Board

Re: House of Secrets: Who Owns London's Most Expensive Mansion?

#21

Post by JimmyL » Sun, May 24, 2015, 12:17 AM UTC

charlesdm wrote: post #20

JimmyL wrote: post #16

Earlier quoted context omitted.

Up until last summer (when the Government won a case letting them change the law), having your expensive house owned by an offshore corporation was the canonical way to avoid a particular type of UK tax called Stamp Duty. When you buy a property, you have to pay Stamp Duty [1] on the value it's sold at. Stamp Duty uses marginal tax brackets, and the highest one (for the portion of the transaction over £1.5M), is 12%.…

Even with the new taxes, people were/are still purchasing through foreign companies (that way, you avoid the 0.5% stamp duty when the shares are sold?). They do have to pay the Annual Tax on Enveloped Dwellings (ATED) then though, which is basically an annual tax that needs to be paid when a corporate entity (i.e not a person or a trust) owns a property.

Very true, but ATED is cheap.

On a (for example) £7M house you would have paid £750K Stamp Duty, or if sold though a corporate transfer, £35K of tax on the shares and £36K/yr ATED - so holding it for less than twenty years would have been a deal, assuming no other possible savings from the corporate option.

Re: House of Secrets: Who Owns London's Most Expensive Mansion?

#22

Post by charlesdm » Sun, May 24, 2015, 12:40 AM UTC

JimmyL wrote: post #21

charlesdm wrote: post #20

Earlier quoted context omitted.

Even with the new taxes, people were/are still purchasing through foreign companies (that way, you avoid the 0.5% stamp duty when the shares are sold?). They do have to pay the Annual Tax on Enveloped Dwellings (ATED) then though, which is basically an annual tax that needs to be paid when a corporate entity (i.e not a person or a trust) owns a property.

Very true, but ATED is cheap. On a (for example) £7M house you would have paid £750K Stamp Duty, or if sold though a corporate transfer, £35K of tax on the shares and £36K/yr ATED - so holding it for less than twenty years would have been a deal, assuming no other possible savings from the corporate option.

Probably, yeah.

Even though this law should dissuade people from buying through corporate vehicles, all the existing housing stock (i.e. probably nearly all the property in Kensington & Chelsea, Knightsbridge, Belgravia, etc that is from the 1700-1900s) that is worth holding through SPVs is already held through SPVs, and will not be captured by this change.

Developers usually split up their new buildings in separate entities before they build anything, because I believe only stamp duty is payable on the land then. Instead of then selling the property, they sell the shares, which is taxed as capital gains (instead of corporate income) for them. Good times in the luxury market, since share sales in corporate vehicles tend to be tax free.

It's still very much a win-win situation for both seller and buyer (probably much less for new developments after this change), so no reason not to do it. I don't think this will raise significant amounts of tax any time soon. :)

Re: House of Secrets: Who Owns London's Most Expensive Mansion?

#23

Post by detaro » Sun, May 24, 2015, 3:41 AM UTC

dopeboy wrote: post #17

kvcc01 wrote: post #15

Earlier quoted context omitted.

Whenever I walk in Central Park in the evening, I pay attention to how many windows of adjoining buildings have their lights on, as a rough proxy of current occupancy. Billionaire-class buildings like 15CPW, One57, etc. are often 80% dark. On a holiday weekend like today (it’s considered lame to be stuck in the city -- you need to be in the Hamptons or wherever), they can be completely dark. I’ll go check in a while.…

I wonder if there's a cool data science project here. On a repeat basis: take a picture at night, do some basic CV on it, and output an occupancy rate. Might be interesting for some of the luxury buildings you've noticed.

Maybe scrape public webcams for images, if there are any usable ones at nearby landmarks etc.