The Race To Miss The Stamp Duty Deadline
April 6th 2011 is the deadline to complete property transactions for property over £1m, to beat the new Stamp Duty levy of 5%. The proposed increase was brought in under the previous090-554 Labour Government to help fund the exemption of the first tier of the tax; up to a purchase price of 250k, for first time buyers only.
At the time it was welcomed as having the potential to kick-start the whole housing market, as it was believed that a lack of first time buyers was holding the market back. By incentivising them, it was thought demand would be stimulated and there would be a knock-on effect at all higher levels. The break for first time buyers was initiated immediately after the budget in April 2010 and with hindsight it hasn't had the desired effect. This is mainly because of the continuing difficulties in obtaining mortgage finance, which neither government has yet to tackle adequately, nevertheless the 5% levy is still to be honoured.
As a consequence all agents with a presence in the £1m plus market have reported strong demand at the start of 2011, and an increase in prices across the board. As we reach the start of February, time is becoming ever more precious to insure the transactions are completed before the deadline. Combine this with the City bonus season and it is certainly a busy part of the market at the moment, if not the busiest.
Solutions
There are, to varying degrees of success, a number of different schemes that use legal loopholes to increase the likelihood of minimising the bill for SDLT. Although frowned upon by the Government and (most) lenders alike, they still prove to be a popular method to reduce the cost of moving.
Another method, which occurs more by luck than judgement, is when a property asset is owned by a Limited090-600 Company, as the shares can then be transferred to another company set up by the new owner*. With SDLT on certain share transfers being only 0.5%, this can offer a serious saving. This is popular with foreign nationals because of the protection owning through a Limited Company can offer against future Inheritance Tax, and given that over 50% of all properties over £1m purchased since September 2009 have been purchased by overseas buyers, this could become the most popular way of mitigating this tax in the future.
If you are looking for, or have found a property that falls into the £1m plus category, and have concerns that the mortgage and legal process could see you miss the deadline, contact us today and make this clear.
Please feel free to contact us on 020 7940 4747 or your advisor directly for more information.
090-601Enness Private Clients is not authorized to provide taxation advice and this article is intended as a general guide and is not to be relied upon in any circumstance.
At the time it was welcomed as having the potential to kick-start the whole housing market, as it was believed that a lack of first time buyers was holding the market back. By incentivising them, it was thought demand would be stimulated and there would be a knock-on effect at all higher levels. The break for first time buyers was initiated immediately after the budget in April 2010 and with hindsight it hasn't had the desired effect. This is mainly because of the continuing difficulties in obtaining mortgage finance, which neither government has yet to tackle adequately, nevertheless the 5% levy is still to be honoured.
As a consequence all agents with a presence in the £1m plus market have reported strong demand at the start of 2011, and an increase in prices across the board. As we reach the start of February, time is becoming ever more precious to insure the transactions are completed before the deadline. Combine this with the City bonus season and it is certainly a busy part of the market at the moment, if not the busiest.
Solutions
There are, to varying degrees of success, a number of different schemes that use legal loopholes to increase the likelihood of minimising the bill for SDLT. Although frowned upon by the Government and (most) lenders alike, they still prove to be a popular method to reduce the cost of moving.
Another method, which occurs more by luck than judgement, is when a property asset is owned by a Limited090-600 Company, as the shares can then be transferred to another company set up by the new owner*. With SDLT on certain share transfers being only 0.5%, this can offer a serious saving. This is popular with foreign nationals because of the protection owning through a Limited Company can offer against future Inheritance Tax, and given that over 50% of all properties over £1m purchased since September 2009 have been purchased by overseas buyers, this could become the most popular way of mitigating this tax in the future.
If you are looking for, or have found a property that falls into the £1m plus category, and have concerns that the mortgage and legal process could see you miss the deadline, contact us today and make this clear.
Please feel free to contact us on 020 7940 4747 or your advisor directly for more information.
090-601Enness Private Clients is not authorized to provide taxation advice and this article is intended as a general guide and is not to be relied upon in any circumstance.
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