Information is starting to filter through in relation to Wednesday’s budget announcement, and it doesn’t look good for developers of residential property.
The provisions, and the draft legislation included with them, apply an extra 3% SDLT (Stamp Duty Land Tax) to purchases of additional residential property by individuals after 1 April 2016. This was a component part of the Government’s commitment to provide more housing for first time buyers and families, announced in 2015’s Autumn statement.
What has become apparent from Wednesday’s announcements is that there is no carve-out or relief for property developers acquiring dwellings through limited companies, to develop and resell. In other words, all purchases of residential property for development by limited companies after 1 April 2016 are subject to the additional 3% SDLT.
It doesn’t need an accountant to work out the impact of an additional 3% SDLT charged on a development expecting to yield a 20% return – the developer’s profit will be reduced by some 15% – and yet these are the guys (and gals) who will build the houses needed to overcome the housing shortage. Go figure!
So I did. I pondered this in the context of the desire to build more houses, and try in some way to link that to how Wednesday’s revelations support the Government’s 5 point housing strategy?
It could lead traditional “residential to residential” developers to look to “commercial to residential” schemes? One can tie this in with the relaxation of the Permitted Development rights and conclude that perhaps the push is towards converting more office space into residential accommodation. This may favour first time buyers but is not so good for families wanting houses.
One can’t ignore Wednesday’s announcements increasing the SDLT charges on commercial property for many schemes, although in most cases it’s still likely to be less costly in terms of SDLT than residential purchases.
Or maybe one can look at more provocative ideas, which have been suggested recently. The limited information available appears to exclude the additional SDLT rates for residential property if “land” is acquired rather than dwellings. This could potentially include back-land developments (back gardens) and brownfield sites, and that would indeed be a good thing for families looking for suitable housing.
And dare I say it, the Green Belt, would also count in this, and that is an inflammatory topic indeed!
The information in this article was correct at the date it was first published.
However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.
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