+44 (0)20 7408 5155 enquiries@residentialland.com

Richard Berridge, Sales & Acquisition Consultant at Residential Land recently commented on the 2012 Budget and how it is likely to effect Residential property in London:

The 2012 Budget is being touted as ‘fiscally neutral’  and it is clear the George Osborne is adhering to his deficit cutting plan and global  credit agencies placing Britain on a negative watch/outlook will have hardened his resolve in doing so.

It wasn’t the greatest budget for Prime Central London property owners as the Chancellor has bowed to pressure from within the coalition to ensure the ‘rich’ pay their ‘fair share’. This now means that residential properties valued at £2m and above will now attract SDLT at 7%.

Residential properties at this value level bought via a company structure will be subject to a 15% levy. The Budget report refers to ‘certain non- natural persons’ as an initial guide to their intentions, but the specifics are far from clear.  Since these ‘regulations’ came into effect on 21st  March, immediate tax planning is going to be entertaining…

Companies owning residential properties worth £2m+ may also be subject to an annual tax. Although this is subject to consultation and will not apply until April 2013. Again, the devil will be in the detail.

At Residential Land we believe these measures are aimed at individuals looking to avoid paying SDLT at prevailing  rates, and not bona fide property investment/development companies.  Therefore, we  are of the opinion that  the increase in SDLT announced by the Chancellor will not have any great impact on the residential investment industry or the  PRS.  In fact, were such measures be found to have a deleterious impact on our industry, it would be clearly counter –intuitive to current government policy of encouraging inward investment.

We’ll know more at the end of the month when the finance bill is published, but we’re not fretting about it.

A brief summary of the salient points:

•SDLT of 7%  was announced for residential properties over £2m from midnight today. Any such homes purchased through ‘certain non-natural’  corporate structure will be liable for 15% SDLT

•The Government will extend the capital gains tax regime to gains on the disposal of UK residential property and shares/interests in such property by non-residents.

•Individuals currently paying tax at the highest rate, 50%, will have that rate reduced to 45% in April 2013.

•The personal tax allowance will be raised to by £1,100 (13%) to £9,205 in April 2013.

•The current level of Corporation tax will be cut from 26% to 24%in April 2012 and will reduce to 22% in 2014.

•A new general anti-tax avoidance rule will be introduced.

•Companies are using the VAT rules that exempt the rental of land to avoid tax that their competitors are paying.  This  may have implications for both taxpaying funds and non-tax paying organisations such as charities and trusts

• Further Government support for £150m of tax increment financing to assist  councils in promoting  development towards delivering  3,000 new homes.