Yesterday was ‘Tax Day’ and despite nervousness that Capital Gains Tax and Stamp Duty Land Tax would be in the running for changes, the mix of responses to past consultations, proposals to new consultations, and updates to ongoing reviews were silent in respect of both.
The ‘fiddle’ of holiday lets that aren’t really used as holiday lets but simply second homes looks set to change.
“The government will legislate to change the criteria determining whether a holiday let is valued for business rates to account for actual days the property was rented, following a previous consultation. This will ensure that owners of properties cannot reduce their tax liability by declaring that a property is available for let while making little or no actual effort to do so,” said the announcement.
In England, a holiday let is currently liable to pay business rates rather than council tax when the owner declares they intend to make their property available to let 140 days in the coming year. There is no requirement for business rates purposes to undertake checks to verify that they are actually commercially rented out.
Of the over 60,000 holiday lets currently on the business rates list, around 96% have a rateable value which would likely qualify them for Small Business Rates Relief and as a result pay no business rates at all.
The new criteria will ensure that owners of properties that are not genuine businesses are not able to reduce their tax liability by declaring that a property is available for let but make little or no realistic effort to actually let it out.
The fallout from the Cladding scandal is coming into HMRC’s sights with another annoucement stating that they will, “publish a consultation on a new tax on the largest residential property developers.”
The tax will be introduced in 2022 to help pay for the costs of cladding remediation and the consultation will be published in the coming months.
Brendan Sharkey, Head of Construction and Real Estate at MHA MacIntyre Hudson, was less than impressed:
“We need to know more about this tax but based on what we do know it could be considered unfair. A large residential developer who has not built a block of flats or one with cladding shouldn’t be held responsible for fixing this problem. In addition, some property companies who have been involved in cladding issues are now correcting their mistakes: they don’t deserve to be charged twice.
“What we do know is that developers that do have to pay this additional tax will look to recover the cost from future sales so, in all likelihood, the cost of housing will go up.”
There’s to be a simplification of Inheritance Tax so that many more non-tax paying estates will become exempt from the filling in of forms from 2022.
David Alexander, joint Chief Executive Officer of property lettings firm apropos, said:
“This is long overdue as many smaller estates still have a lot of administrative paperwork to complete. This makes sense simply because it makes the system less unwieldy and more consumer friendly. The truth is that the Chancellor has already made a substantial hit from Inheritance Tax (IHT) in his budget. Freezing the IHT threshold until 2026 at £325,000 until 2026 brings many more ordinary homeowners into the tax net and many will find their relatives face a substantially increased tax burden when they inherit.”
Financial Secretary to the Treasury, Jesse Norman, said:
“We are making these announcements in order to increase the transparency, discipline and accessibility of tax policymaking.
“These measures will help us to upgrade and digitise the UK tax system, tackle tax avoidance and fraud, among other things.”
For Anthony Codling, of Twindig, Tax Day was a “bit of a damp squib”.
“For individuals, property taxes and Capital Gains taxes relating to property have been left unchanged. Whilst this is welcome news to those with property, is it the right thing to be doing right now?
“The Stamp Duty Holiday was launched in July 2020 as a short term policy to kick start the UK Housing market after lockdown and to help, in part, guard against house prices falls. Since Stamp Duty Taxes went on holiday house prices and the levels of public debt has increased significantly.
“Whilst few are fans of paying more tax, there is a time and a place. The pandemic has caused financial hardship for many whilst boosting the asset values of others. Tax day coincided with the anniversary of the first lockdown, it was billed as a national day of reflection.
“In my view, it is a missed opportunity that those who have benefitted over the last year have not been called upon to help those who have not.”
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