Stamp Duty

Downsizers should get stamp duty cuts just like first timers – call

Downsizers should get stamp duty cuts just like first timers - call

Family houses are under-occupied and only incentives to downsize can help improve the housing market – with a stamp duty cut being one of the most obvious.

That’s the thrust of a new report from the Centre for the Study of Financial Innovation, which says that if nothing is done there will be some 20m ‘surplus’ bedrooms by 2040, in homes occupied by the over-65s.

The growth in older households – over half of them one-person – is set to account for 36 per cent of the projected 3.7m increase in the number of UK households by 2040, it says.

The report says the current stamp duty regime “tends to jam up the housing market and can add significant costs to downsizing.”

It therefore calls on the government to ensure that so-called ‘last-time’ buyers are put on an equal footing with first time buyers with property purchases of up to £300,000 nil-banded for stamp duty.

The report also blames the housebuilding industry in part, saying there is a shortage of appropriate housing at affordable prices for downsizers; out also wants more independent financial guidance for older owners wishing to downsize.

Stamp Duty tax break MUST happen, surveyors tell government

Stamp Duty tax break MUST happen, surveyors tell government

A large majority of property professionals polled by the Royal Institution of Chartered Surveyors say a stamp duty holiday would be an effective way of kick-starting the housing market.

RICS has welcomed the re-opening of agents’, conveyancers, surveyors and removal company offices but it warning that the government must do more to bolster demand and house building.

Some 62 per cent of those responding suggest a stamp duty holiday would help the market recover post-pandemic, by lifting sales and leaving prices relatively unchanged.

On average, respondents anticipate sales would rebound to their previous levels in around nine months.

In its monthly snapshot of housing market activity for April, RICS says that – unsurprisingly – a net balance of 93 per cent of respondents reported a decline in new buyer enquiries over the course of the month, dipping further from a net balance of 76 per cent in March.

New instructions also continued to fall, with 96 per cent of contributors reporting a drop rather than rise in new properties being listed for sale. This is the weakest net balance reading since the inception of the RICS measurement in 1999.

As far as prices are concerned, following a run of three successive months of positive readings, the RICS headline house price balance fell into negative territory with a net balance of 21 per cent noting a decline in prices.

Some 35 per cent of the survey participants believe that when the market reopens, prices could be left up to four per cent while around four in 10 take the view that prices could in fact fall by more.

They suggest that a recovery in prices could take a little while longer than sales levels, with respondents suggesting, on average, prices will recover in 11 months.

“Not surprisingly, the latest survey shows that housing activity indicators collapsed in April reflecting the impact of the lockdown. Looking further out, there is a little more optimism but the numbers still suggest that it will be a struggle to get confidence back to where it was as recently as February. Moreover, whether this can be realised will largely depend on how the pandemic pans out and what this means for the macroeconomic environment” explains Simon Rubinsohn, RICS’ chief economist.

“There are, of course, other options available to government as they reopen the market, notwithstanding stamp duty options such as reducing or removing stamp duty for downsizers that would kickstart market fluidity, and we look forward to continuing conversations as the market starts to move again.”

Stamp Duty Holiday momentum builds as law firm joins the call

Stamp Duty Holiday momentum builds as law firm joins the call

A property law firm is the latest to back a call for a stamp duty holiday to help kick-start the housing market after the lockdown.

Collyer Bristow has joined the Royal Institution of Chartered Surveyors, Knight Frank, Home Builders Federation and others in saying that swift action is needed to prevent further damage to the market.

Janet Armstrong-Fox, partner and head of private client property at Collyer Bristow, says: “The residential market is all but at a standstill and will remain so until the current restrictions are lifted. Even then, a slow return to a buoyant market is predicted. Clearly something is needed to kick-start the housing market.”

She continues: “We recognise that this will be a sizeable challenge for government: stamp duty has been a cash cow for HMRC coffers and will come at a time when it will be looking to increase tax revenues following the extensive support offered throughout the Covid-19 crisis.

“Whilst a stamp duty holiday is unlikely, a reduced rate for a set period of time for homes under a £500,000 threshold, and perhaps even higher in London, would provide the stimulus needed to reignite the market.”

But Armstrong-Fox says the action is needed urgently.

“We would urge government to act swiftly in introducing any relaxation of the stamp duty regime as the rumours of such a move may further dampen the housing market with buyers and sellers waiting for fear of missing out on some impending relaxation” she urges.

Stamp duty could be lowered by Chancellor

A London estate agency says one of its buyers wants to delay completion until November 1 “just in case stamp duty is changed in October”. Aylesford International director Brendan Roberts says one of his firm’s buyers made the request following speculation that stamp duty could be lowered by Chancellor Sajid Javid.

“Anyone looking to sell is unlikely to conclude a sale much before late October even if they found a buyer early September, so agreeing a delayed completion to allow for any changes in SDLT shouldn’t create too much inconvenience and with buyers thin on the ground it is useful to be flexible and adapt to help buyers commit” explains Roberts.

The move follows widespread speculation by government ministers that stamp duty will be reformed – but without saying when or how. Other agents report alternative tactics pursued by purchasers keen to avoid paying more SDLT than they need – but these raise questions over whether conveyancers would help.

“We have had a pronounced increase in enquiries from clients seeking to utilise the existing ‘mixed use’ stamp duty concession. This concession is still not well understood but can yield dramatic savings on higher value properties” explains Gideon Sumption of Stacks Property Search.

“There is a huge and obvious incentive to look at mixed use property where the maximum rate of SDLT is five per cent. There is no current legal definition but such is the amount of money involved there will almost certainly be some case law soon” Sumption continues.

“The current understanding is that for mixed use SDLT to apply, the property needs to have a commercial element, namely enjoy commercial income from land or buildings that from part of the whole. This could be a self-contained annexe let on an assured shorthold tenancy, some pasture let to a farmer or some buildings let as workshops. What won’t qualify are extensive grounds used purely for the enjoyment of the house.”

Another Stacks agent, Bill Spreckley, says buyers are becoming “more and more aware “ not only about the mixed use option but also how so-called ‘multiple dwellings’ can attract lower SDLT.

“If you buy a property with ‘Multiple Dwellings’ – that is an annexe, cottage or flat – then there are discounts available. One takes the price of the whole property, divide it by the number of properties, work out the SDLT per property and then multiply that figure by the number of properties again” he says. He says a principal property sold with two cottages counting as ‘multiple dwellings’ – each sold at a notional £666,666 – would attract stamp duty of £69,999 but sold as one unit at £2m it would incur SDLT of £153,750.

Are you entitled to a stamp duty rebate

Primas Law is urging landlords and property developers to seek legal advice about potential stamp duty rebates on ‘uninhabitable’ second properties after a landmark tribunal case. A recent ground-breaking case, between P N Bewley Ltd and HMRC, held that properties that are not immediately habitable at the time of completion do not constitute as a “dwelling” for the purpose of the Finance Act 2003.

This finding could have major implications for the UK housing market, according to Primas Law, as the decision meant that P N Bewley was not liable to pay the additional 3% stamp duty surcharge applicable to second homes. It could mean that those who have paid stamp duty on similar uninhabitable properties – including potentially thousands of landlords and developers – may have paid an inappropriate level of tax and could seek to reclaim them.
Consequently, Primas Law is being instructed to act for a large and growing number of landlords and developers seeking to recover stamp duty paid for properties that, potentially, should not have attracted the additional tax.

Daniel Thomas, Head of Litigation at Primas Law, said: “To provide more context to this particular case, the property that P N Bewley purchased was a bungalow and a plot of land in Western-super-Mare.

“The company’s intention was to demolish the bungalow and build a new dwelling on the land with planning permission already being granted. The bungalow was essentially a derelict building that had been unoccupied for around three years.

“The tribunal was provided with photographs of the derelict building and these demonstrated the heating system, radiators, floorboards and pipework had been removed, and that the property – both internally and externally – was in a very poor condition.

“It was also provided with reports from surveyors that concluded asbestos was present in the property and urgently needed removing.”

COMMENT

If you are a developer and are buying property unfit for habitation, then this law could definitely apply, but you may need to use a solicitor who is up to date with property law, as most who simply deal with run of the mill conveyancing may not be aware of this law, or not familiar with the process of appeal, meaning that you could potentially pay out many thousands that you need not pay.