Budget bombshell: Will landlords be able to find loopholes?

Could there be tax loopholes that could catch the Government blindsided?

And will sellers of second homes and buy-to-lets distort the market by trying to beat next April’s tax deadlines?

Both scenarios have been raised following this week’s Autumn Statement.

On Wednesday, Chancellor George Osborne announced a 3% rise in Stamp Duty Land Tax for buy-to-let and second-home purchasers.

Large corporate entities owning at least 15 properties will be exempt from the higher charges.

There is to be a consultation on the policy detail.

However, according to accountant George Bull of RSM, it is “clear” that the Government wants to see landlords with only one or two properties leaving the sector “to be replaced by larger landlords, funds and corporate bodies potentially backed by overseas money”.

James Greenwood of Stacks suggests that landlords could join together to form larger companies.

He said: “We’ve yet to see some of the detail, and as it’s revealed affected parties will start to find loopholes.

“Landlords with small portfolios may club together to form a corporation holding of more than 15 properties, thereby exempting themselves from the rules.”

Greenwood also warned: “Osborne has administered another blow to an already fragile housing market.

“As we already know, it’s impossible to isolate a specific part of the market without affecting the rest.

“Break a big toe, and it becomes almost impossible to walk.”

He added: “Far from raking in receipts from the last round of Stamp Duty increases at the upper end of the market, the Government has simply witnessed a sector shutting down.

“The same will happen to the bottom of the market which is significantly driven by second homes and buy-to-lets.

“If the market is cold at both ends, the middle can’t warm up.

“Will there be a rush to buy prior to April?

“I doubt it. Competitive bidding will simply add a percentage to the price, cancelling any benefit to avoiding the extra 3%.

“And we are likely to see prices of the kind of property suitable for second homes and buy-to-lets dropping in price after the changes come into effect.

“The rental market will also suffer with less property available, and prices rising.”

He went on: “Chains will certainly become weaker.

“Downsizers regularly buy before they sell, and this tactic will now be too costly to be appealing.

“Older buyers with non-property owning offspring may use their kids as a temporary haven for their additional property.

“But whatever strategies buyers use, and loopholes some are able to exploit, this move will lead to at least a year of very poor transaction levels in all sectors of the market.”

Alan Ward, chairman of the Residential Landlords Association, has dubbed Budget day this week as Black Wednesday.

Ward said: “Politically, Osborne seems to have declared open season on independent landlords – formerly the bedrock of Thatcherism, self-reliant entrepreneurial voters who were not going to be dependent on the State.”

Meanwhile, respected industry figure Nicholas Leeming warned of distortion to the market.

Leeming, who is chairman of Jackson-Stops & Staff, said: “Landlords provide a valuable service in providing homes for those without the capital to buy, and the Chancellor should do all he can to encourage private investment in the rental sector to provide a substantial and diverse range of rental properties.

“This is another increase in transactional costs for property and this will inevitably lead to market distortion nearer the introduction date.

“Vendors should make the most of the opportunity before the April deadline.”

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4 Comments

  1. Trevor Mealham

    The writings been on the wall for some time.

    Were likely to see more crowd funded BTL, the worry is then if the crowd leaders get it wrong …….

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  2. Jacqueline Emmerson

    It seems to me that the big builders lobbyists have been very powerful. All monies and laws seem to be directed in their favour now. I read recently how difficult it has become for smaller builders to cope with new regulations based around maintenance of a site in the long term. Now money to help big builders build under yet another government scheme. This money could have been given to housing associations or local authorities if it had been the government’s true intention to ease the housing crisis.

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  3. seenitall

    sounds/feels also that the govt want to drive out independent letting agents as well.

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  4. Trevor Mealham

    There’s been a big shift towards lettings as BTL have taken advantage of what was out there to enable buying investments. It’s been a good run, unfortunately, all good things come to a level of end.

    Biggest fear is that many (not all) but many rogue traders will leaver more deals under the radar with bits like lease options. There’s a few genuine ones. But most take advantage and trade outside any redress on vulnerable consumers

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