The Coalition Government and Property
MAY 2010
The new conservative-Liberal Democrat Government issued a statement of intent on 12 May 2010 which sets out their compromise policy objectives for the new Parliament. Several of these are of huge impact for the commercial and residential property sector. Note the following:
- 1. As regards tax policy generally there will be an emergency budget before the end of June. It will increase CGT from the current 18% rate for non-business assets from 6 June 2011. This will have significant impact on buy-to-let and second home ownership tax burdens. VAT is also likely to increase over the few years, due to budget deficit pressures. This will mean the cost of buying and selling, or a tenancy of a property that is elected for VAT, will increase; a significant burden on anyone who is unable to recover it as a taxable supply.
- 2. The Conservative manifesto proposal to “take nine out of ten first time buyers out of SDLT” was not contradicted. There is a possibility, subject to budget deficit pressure, that the lower threshold of SDLT will rise or the first time buyer SDLT two year holiday for properties of up to £250,000 introduced by Labour’s last budget will be made permanent or both. The 5% band to be introduced from 6 April 2011 for properties over £1 million was not mentioned. No doubt the Conservatives would love to cancel this but this measure is one that the Liberal Democrats favour and, given the need to address the budget deficit, it is likely to be preserved. There was no suggestion in the budget that this would affect commercial property though, so the pernicious double bind SDLT on the VAT inclusive price (as VAT does not bite on residential property) should be avoided. The Liberal Democrat manifesto promised to take further SDLT anti-avoidance measures preventing “wealthy individuals and business” avoid SDLT by setting up an offshore structure, so we can look forward to more attacks on elaborate SDLT avoidance schemes.
- 3. Home Information Packs are to be abolished. This could happen as soon as 25 May, if David Cameron includes the change in the “great repeal bill” he promised. In the meantime prospective sellers and their estate agents are left in limbo. As things stand, a HIP must be commissioned before a property is put on the market, at the cost of the seller. It could well be that by the end of next month this will not be necessary, and there may be a temptation to defer marketing until the position becomes clear. Whilst HIPs are of limited value and the searches in them usually cannot be relied on, we are used to them now, and at times, especially when the property is leasehold, it is extremely useful for a buyer’s solicitor to see title and lease documents early. Ironically the least useful item in HIPs is the Energy Performance Certificate and this is likely to survive, and continue to be needed for all property, residential and commercial, where the owner wants to let or sell.
STOP PRESS: Per 3 above HIPs have been abolished today: 20.05.2010
If you would like any further information about the issues raised in this article or any other aspect of property law please contact Mark Kendrick or any other member of Goodman Derrick LLPs property department on 0207 404 0606.
This guide is for general information and interest only and should not be relied upon for providing specific legal advice. |
