Posts with tag: Stamp Duty

Stamp duty changes to cause ‘mayhem’

Published On: November 30, 2015 at 12:54 pm

Tags: Broker Conveyancing,buy-to-let landlords,conveyancing,landlords,Stamp Duty

A leading broker-focused conveyancing distributor has issued a warning that the upcoming increases in stamp duty for Buy-to-Let homes and second properties could cause, ‘mayhem’ earlier in the new year.

Broker Conveyancing believes that rent hikes effective from April 1^st will place enormous pressure on conveyancing firms to meet the deadline over the coming months.

Changes

Those looking to purchase second homes and buy-to-let investment properties will be hit with a 3% extra stamp duty land tax at the beginning of the new tax year. This will represent a considerable increase on the amount presently paid by those in the market.

The conveyancing distributor believes that the sector’s current resources may not stretch to the demands potentially about to be placed upon them. March next year coincides with the Easter break, which is usually a very busy time for the market.

In addition, Broker Conveyancing suggests that other conveyancing firms may start to charge additional premiums on buy-to-let purchases to deal with the added pressure and to discourage too much exposure to buy-to-let business.

Slowdown

What’s more, the firm anticipates a slowdown after 1^st April, which would lead to more resource issues for firms to deal with.

Harpal Singh, Managing Director of Broker Conveyancing, said, ‘while I can partly understand why the Chancellor might wish to put the brakes on buy-to-let investment, the method of increasing stamp duty land tax for these purchasers will have a huge impact on the housing market as a whole and could result in a less than smooth process and quite frankly, mayhem.’[1]

Stamp duty changes to cause, ‘mayhem’

Singh believes that, ‘the four-month notice period is incredibly short and it is likely to mean a very busy time for all stakeholders, particularly the conveyancing profession who are going to be pushed by all concerned to try and complete purchases before the 31^st March next year.’ He thinks, ‘this will mean serious resource issues for these firms, especially when we factor in the double whammy brought about by the timing of the Easter break next year and the fact we’re not just talking about individual investment property completions but also the entire chains that they will sit within.’[1]

Completion Issues

Mr Singh went on to say, ‘another conveyancing issue will be the ‘no completion, no fee’ deals currently on offer – if these buy-to-let and second home purchases do not complete then there is a greater likelihood of them falling through. It seems almost certain that buy-to-let conveyancing fees will rise in order to cope with this, the extra workload, and I wouldn’t be surprised to see some firms pulling back on their ‘no completion, no fee’ offers.’[1]

‘It will be apparent to all advisers that ensuring their buy-to-let clients deal with specialist conveyancing firms is an absolute necessity in order to have that chance of securing a pre-1st April completion. Finally, we have to consider the impact on the market after this deadline is passed – we are likely to see a considerable slowdown and conveyancing firms, along with many other stakeholders, could move from feast to famine. Resource and business issues will need to be managed carefully in such an environment,’ he concluded.[1)

[1] http://www.propertyreporter.co.uk/finance/stamp-duty-changes-to-cause-conveyancing-mayhem.html

Autumn Statement: The industry reacts

Published On: November 29, 2015 at 10:02 am

Author: Em Morley

Categories: Finance News

Tags: Autumn Statement,Buy-to-Let,buy-to-let landlords,landlords,Stamp Duty

The Autumn Statement and Spending Review saw Chancellor Osborne pile more financial misery on buy-to-let landlords. Mr Osborne announced that the government is to raise stamp duty on buy-to-let properties and second homes by 3%.

These alterations are planned to come into force in April 2016.

Reaction

Understandably, there has been a heated reaction to the news across the industry.

Richard Lambert, CEO of the National Landlords Association, believes, ‘the Chancellor’s political intention is crystal clear, he wants to choke off future investment in private properties to rent.’ [1]

‘If it’s the Chancellor’s intention to completely eradicate buy-to-let in the UK then it’s a mystery to us why he doesn’t just come out and say so,’ he added.[1]

Paul Smee, Director General at CML said, ‘additional stamp duty on buy-to-let transactions come hot on the heels of the forthcoming tax changes to landlords already announced. The Government will need to keep a careful eye on the cumulative effects; with the private rented sector housing around a fifth of the population, we do need to avoid unintended consequences.’[1]

Catastrophic

David Cox, managing director of the Association of Residential Letting Agents (ARLA) described the increases as, ‘catastrophic news for the private rental sector ,’ considering the, ‘recent changes to mortgage interest tax relief and the annual wear and tear allowance.’ He feels that, ‘increasing tax for landlords will increase rents and reduce property standards for tenants.’[1]

Cox fears that, ‘to make owning a BTL property financially viable, landlords will need to pass on the increased stamp-duty costs to tenants, who will in turn see less spent on maintaining their property and of course see increased rents.’[1]

Autumn Statement: The industry reacts

He also believes that the changes, will, ‘deter new landlords from entering the market, pushing the gap between dwindling supply of available property and growing demand even further apart.’[1]

Stuart Law, CEO at Assetz for Investors, said, ‘the buy-to let investor should not be blamed for house price rises, rather this is down to the chronic shortage of housebuilding in this country which is compounded by population growth. We would therefore advise caution against penalising this group of investors when actually other policy areas hold the key to unlock the solution.’[1]

Blow

Alex Gosling, CEO of online estate agents HouseSimple.com simply said, ‘ouch.’ He did go on to say that the changes in stamp duty were, ‘another blow to landlords, so soon after the cut in mortgage interest tax relief.’ He also described George Osborne as, ‘enemy No1 for the buy-to-let sector.’[1]

‘Hopefully, this hasn’t sounded the death knell for buy-to-let,’ he added.[1]

Jonathan Hopper, managing director of buying agents Garrington Property Finders noted that, ‘landlords are under attack again,’ calling the move, ‘Osborne’s buy-to-let double whammy.’ He believes buy-to-let landlords are, ‘going to get sledge-hammered with a bigger stamp duty tax bill.’[1]

He went on to ask, ‘why does Osborne have such a grudge against the buy-to-let sector?’[1]

A question that will continue to provoke debate, methinks.

[1] http://www.propertyreporter.co.uk/hero/btl-and-second-homes-to-be-hit-by-3-rise-in-stamp-duty.html

Conveyancer jailed for Stamp Duty fraud

Published On: November 27, 2015 at 11:46 am

Author: Em Morley

Categories: Finance News

Tags: Autumn Statement,conveyancing,Stamp Duty

With Stamp Duty a hot topic this week due to the alterations announced by the Chancellor in the Autumn Statement, a warning has been issued to property industry professionals in Britain to ensure they are carrying out correct returns.

The warning comes after a conveyancer was put behind bars for stealing money paid in good faith by his clients.

Mr Anthony Maragh from Harrow in London, purposely and consistently undervalued his clients’ homes, so that less stamp duty tax was paid to HMRC. He then kept the difference and made a pretty sum.

Crime

In total, Mr Maragh conned his clients and HMRC out of £352,500 in stamp duty land tax between 2008 and 2013. Investigators found that he forged paperwork in order to undervalue clients’ properties, meaning the amount of tax owed was reduced. However, he charged them the full amount and kept hold of the difference.

Overall, Mr Maragh under declared the stamp duty tax due on 43 transactions, transferring £297,000 straight from the solicitor’s company accounts into his personal bank account. In addition, he spent another £55,000 from the Client Account on antique Chinese gold bonds.

Martin Brown, assistant director of the Fraud Investigation Service at HMRC, said, ‘ as a conveyancer, Maragh knew only too well that he was breaking the law and what the consequences of his actions would be.’[1]

Conveyancer jailed for Stamp Duty fraud

Abuse

‘He abused the trust of his clients, stealing money that had been paid by them in good faith to meet their tax liabilities, to line his own pockets. Maragh thought that his scheme would go undetected, but he was wrong and is now behind bars with is reputation and career in tatters,’ he added.[1]

As a result of his actions, Maragh was sentenced to three years and four months in prison. Confiscation proceedings to get back the proceeds of crime have already begun.

In court, Her Honour Judge Poulet said, ‘this was repeated offending and an abuse of position and trust with a large number of victims exposed to risk.’[1]

[1] http://www.propertywire.com/news/europe/uk-conveyance-tax-fraud-2015112711254.html

BTL homes hit with increased stamp duty

Published On: November 26, 2015 at 11:26 am

Author: Em Morley

Categories: Finance News

Tags: Autumn Statement,Buy-to-Let,buy-to-let landlords,Stamp Duty

In the Autumn Statement yesterday, Chancellor Osborne announced that the government is to increase stamp duty on buy-to-let properties and second homes by 3%. This is to become effective at the start of the new tax year in April 2016.

Osborne said that, ‘more and more homes are being bought as buy-to-lets or second homes.’ He feels that many of these are bought by cash transactions that are not affected by the restrictions introduced in the Budget earlier this year.[1]

Affordability

‘Frankly, people buying a home to let should not be squeezing out families who can’t afford a home to buy. So I am introducing new rates of Stamp Duty that will be 3 per cent higher on the purchase of additional properties like buy-to-lets and second homes. It will be introduced from April next year and we’ll consult on the details so that corporate property development isn’t affected,’ the Chancellor added.[1]

The stamp duty surcharge will raise each band by 3%. This means that for properties valued between £125,000 and £250,000, where stamp duty is 2%, buy-to-let landlords will have to pay 5%.

Further important information for landlords comes with the news that for the average buy-to-let purchase costing £184,000, they will have to pay a further £5,520 from April 2016.

There was good news for commercial property investors with 15 or more properties, who are thought to be exempt from the new charges. In addition, Mr Osborne has pledged to fund an extended Help to Buy scheme in London, alongside more money for the Starter Homes programme.

BTL homes hit with increased stamp duty

Capital Pains

In further alterations, buy-to-let landlords will be hit in the pocket by changes to the Capital Gains Tax. From April 2019, they will be permitted to pay any outstanding Capital Gains Tax within 30 days of selling a property, as opposed to waiting until the end of the tax year as the current rules permit.

Landlords are already set to get a lower rate of tax relief on mortgage fees. In this year’s Budget, the chancellor outlined plans for landlords to only receive the basic rate of tax relief (20%) on mortgage payments. This will be phased in from 2017.

‘If it’s the Chancellor’s intention to completely eradicate buy-to-let in the UK then it’s a mystery to us why he doesn’t just come out and say so,’ he added.[1]

Where the money is going

Up to £60m of the funds raised by the stamp duty surcharge will assist home-buyers in England in locations where holiday homes have led to an increase in local prices.

In addition, the Help to Buy scheme will be extended to 2021, a year more than first planned. What’s more, an extension to the scheme in the capital will see purchasers who can raise a 5% deposit given a loan worth up to 40% of the property. This loan will be interest free for 5 years.

The existing maximum loan is for 20% of the property’s value elsewhere in the country.

In total, the Government has pledged to put an extra £6.9bn into housing in England. This includes an extra £2.3bn in loans for the government starter homes programme and £4bn given to housing associations and local authorities to build more houses for shared ownership.

A further £200m will be utilised to build homes for rent, with the aim to allow tenants to save for a deposit.

[1] http://www.propertyreporter.co.uk/hero/btl-and-second-homes-to-be-hit-by-3-rise-in-stamp-duty.html

Prime country house prices continuing to increase

Published On: October 2, 2015 at 3:11 pm

Author: Em Morley

Categories: Property News

Tags: country houses,prime property market,Stamp Duty

A new report has indicated that prime country house prices continue to rise, with tax policy beginning to make an impact at the top end of the market.

Data from an investigation by Knight Frank shows that prime country house prices increased by 0.7% between July and September. Prices for this type of property have now increased for the eleventh quarter in succession.

Increases

Yearly growth also increased to 2.7%, up from 2.3% during Q2 of this year but down from its recent high of 5.2% in 2014. As a whole, the market is continuing to feel the impact of the increased cost of stamp duty, following the changes in December 2014.[1]

Latest figures from the Land Registry indicate that between January and July of this year, there were 35% less sales of homes with a value of more than £1.5m outside of London from the same time last year.

The prime market below £1.5m has been less affected by the changes. In fact, prices for homes valued under this figure have grown by almost 4% in the year to September. In comparison, properties over £1.5m have seen a price rise of 2%.[1]

Imbalance

Homes under £1.5m, price growth has been driven by demand for homes in town and city centres. These include regions such as Bristol, Bath and Oxford, where buyers are attracted to features such as good schooling and transport links. There is however a significant differentiation between property prices in the prime country market and in London. Evidence from agents suggests that there is significant demand from purchasers in the Home Counties and in the South West.

Prime country house prices continuing to increase

Prime country house prices are still 14% below their 2007 peak, whereas in contrast, prime prices in London are currently 34% higher than their previous peak values. A surge in prices in the capital during the last few years means that buyers looking to swap city life for one in the country are getting more from their money.

‘With such an imbalance in market values between London and country prices together with the surprise Conservative victory in the general election, we all expected much more activity,’ said Rupert Sweeting, Head of Knight Frank Country. ‘The two stumbling blocks have been the introduction of higher rates of stamp duty which means that at £10m, a buyer may be paying a further £1.2m on top. This, combined with the new tax regime being introduced through the Finance Act has caused many to put on hold their buying plans until they have digested the minutiae of that Act,’ he continued.[1]

‘However, activity is picking up this autumn in the realisation that country property is looking good value and we have seen bidding wars for houses if and when the guide price is at the right level. Looking ahead, with another four and a half years of Conservative rule and the economy looking stronger, we expect activity levels to rise,’ Sweeting added.[1]

[1] http://www.propertyreporter.co.uk/property/prime-country-house-prices-continue-to-rise.html

UK residential property stamp duty increases

Published On: October 2, 2015 at 12:50 pm

Author: Em Morley

Categories: Landlord News

Tags: home buyers,residential property,Stamp Duty

The 2014/15 financial year was particularly fruitful for the UK taxman, with HMRC collecting a record £7.5bn in stamp duty from residential property transactions.

This was a rise from the £6.45m in the previous year and from £4.9bn in 2012/13. What’s more, the total tax collected from home-buyers in Britain has risen by 165% over the last six years alone, according to a new report from Knight Frank.

Revenue

Unsurprisingly, transactions in London contributed the largest amount of residential stamp duty revenue, totalling just over £3bn. The South East followed the capital, where revenue totalled £1.6bn. Put together, these two areas accounted for 66% of the total tax take for UK properties.[1]

In between the 2008/09 and 2014/15 tax years, stamp duty revenues in the capital have risen by 248%, in comparison to 158% in the East of England and 140% in the South East. Other regions in England had between 75% and 120% growth during the same timeframe.[1]

These increases in London show that the greater rates of stamp duty on property transactions worth more than £1m mostly affect homes in the capital.

Grianne Gilmore, head of UK residential research at Knight Frank, said that overall, ‘home-buyers still paid more in stamp duty than over the previous 12 months. While the increased take from stamp duty reflects the growth in house prices and a pick-up in transactions, another factor has been the increases to stamp duty charges, especially towards the top end of the market.’[1]

UK residential property stamp duty increases

Steady increases

In addition, Gilmore noted that residential stamp duty raised £7.5bn for the Treasury in the year to April, more than double the amount in 2002/03.

‘The relative burden of stamp duty is also highlighted by the data,’ Gilmore continued. ‘Londoners paid 43 times more stamp duty than buyers in the North East over the last year, a reflection of the widening of the North/South divide in terms of activity and prices but also the higher stamp duty changes for more expensive homes. Buyers in London and the South East accounted for 66% of all stamp duty receipts on residential property in the year to April.’[1]

Gilmore went on to say that, ‘it remains to be seen what the impact of the new stamp duty regime will be for the Treasury in the coming year.’ She said, ‘despite hitting a record high for residential receipts in the year to 2015, the total stamp duty tax take at £10.7bn is £800m lower than the Treasury forecast when it made the changes to stamp duty in December.’[1]

Impact

Tom Bill, head of London residential research at Knight Frank, observed that despite the fact stamp duty rules were only applicable during a quarter of the timeframe in question, the impact that it has had on the prime central London market is irrefutable. He said that the stamp duty figures indicate the contribution to the total UK revenue of the top two local authorities in the country, namely Westminster and Kensington and Chelsea, dropped last year.

Bill noted that, ‘the contribution of the top five London boroughs has fallen to 18.9% from 21.1% over the last two years. To some extent, this may be explained by a pick-up in sales in the rest of the country as stamp duty has fallen for properties worth less than £1.1m, which may have prompted more transactions.’[1]

This said, the rate of growth for stamp duty revenue in Westminster and Kensington and Chelsea has slowed to below the UK average. Indeed, stamp duty revenues in Kensington and Chelsea rose by 1.6% in 2014/2015, in comparison to 27.6% in 2013/14.[1]

Westminster meanwhile recorded revenue growth of 13.3% in the last year, in comparison to 19.4% in 2013/14. In the UK as a whole, stamp duty revenues in the UK rose by 16.3%, compared to 31.5% in 2013/14.[1]

[1] http://www.propertywire.com/news/europe/uk-stamp-duty-analysis-2015100211048.html