Fair Rents (Scotland) Bill or Artificial state manipulation of free market rent?10:34 AM, 6th November 2020
About 4 weeks ago 36
Does anyone think that the changes to SDLT and LBTT are being rushed through without much, if any, thought to the consequences to the wider market?
If yes, please read the following:
First Time Buyers
The Primary Driver for the proposed legislation is to: a) give first time buyers the greatest chance of home ownership by, b) deterring second home or buy to let property purchases
On 19 January 2016, the Office for National Statistics (“ONS”) released their latest monthly House Price Index, showing data to November 2015. In this, the average price paid for a house by a first time buyer (“FTB”) across the UK was £221,000. For London, the average price paid was £425,000, thus heavily skewing the national figures.
Indeed, in the vast majority of the UK, i.e. excluding London and the South East, the ONS notes that the average price paid for a house by a first time buyer (“FTB”) was below £160,000:
North East: £122,000
North West: £141,000
Yorkshire & The Humber: £139,000
East Midlands: £148,000
West Midlands: £158,000
South East: £259,000
South West: £194,000
Northern Ireland: £122,000
Targeted to FTBs…?
Why then is the proposed supplementary tax on additional homes being proposed across the entire range of SDLT / LBTT value bands?
There is no logical reason that supplementary tax on additional homes should apply:
a) At values/bands way in excess of the value which a FTB can afford in a particular region
b) As a “slab” system, being more punitive the further away you get from the value which a FTB can afford
Be in no question, this is a TAX GRAB of the highest order, being both discriminatory and ill thought out.
Additional 3% on SDLT & LBTT will Promote Investment in FTB Properties
Taking my regional area as an example (Scotland), and applying LBTT, which I know is slightly different to SDLT but the same in principle, see how the proposals actually promote investors to buy multiple FTB valued properties at the expense of higher valued properties:
Average FTB Valued Property: £139,000
1. Hypothetical 4 Bed Student Flat in Edinburgh City Centre
Cost: £417,000, i.e. 3x the value of the average FTB property
Proposed LBTT if buying 1x £417,000 property: £27,560
Proposed LBTT if buying 3x £139,000 properties (equates to £417,000): £12,510
An investor will therefore pay 55% (£15,050) less in LBTT by buying multiple FTB average valued properties, for the same outlay as one higher valued property
2. Hypothetical Run-down Townhouse in Edinburgh City Centre. Needs Complete Renovation to be Habitable
Cost: £695,000, i.e. 5x the value of the average FTB property
Proposed LBTT if buying 1x £695,000 property: £63,700
Proposed LBTT if buying 5x £139,000 properties (equates to £695,000): £20,850
An investor will therefore pay 67% (£42,850) less in LBTT by buying multiple FTB average valued properties, for the same outlay as one higher valued property
It is clear that any rationale investor who might have previously bought student housing, or property to renovate/develop, will now make investments in multiple lower valued properties in the future, in order to save on tax.
Investors are actively being pushed into making investments in lower valued properties, directly in competition with FTBs.
This legislation has not been thought through and the consequences of the proposals have not been analysed. The very people the proposals are aimed at helping are going to be further disadvantaged.
The HM Treasury’s, “Consultation on higher rates of SDLT on purchases of additional residential properties”, was published on 28 December 2015 and closed on 1 February 2016. This is a period of 5 working weeks which included a Bank Holiday (1st January).
In Annex B of the consultation, HM Treasury note their Code of Practice on consultations, which state, “should normally last for at least 12 weeks with consideration given to longer timescales”. They actively state that if respondents feel that the consultation does not fulfil this criteria, to please contact them.
If you have any reservations on the proposals for SDLT and/or LBTT, I encouraged you to email the Consultation Coordinator and protest that the timetable is too short and that all unintended consequences (as highlighted above) have not been thought through.
Unfortunately, but predictably, the link to an email address on the consultation does not work, but I am informed that the Consultation Coordinator can be contacted at:
I implore you to highlight the vagaries that the proposals will introduce, as noted by me above. The more people that detail how bad this will be for FTBs, the better.
Those that have been active in contacting the media on Clause 24 etc, I would very much welcome you forwarding the above to your respective contacts.
Link to the consultation and Annex B are copied below:
Extract: At Bottom of Above Linked Page
Annex B: The code of practice on consultation
This consultation is being conducted in line with the code of practice for written consultation, which sets down the following criteria:
•formal consultation should take place at a stage when there is scope to influence the policy outcome
•consultations should normally last for at least 12 weeks with consideration given to longer timescales where feasible and sensible
•consultation documents should be clear about the consultation process, what is being proposed, the scope of influence and the expected costs and benefits of the proposals
•consultation exercises should be designed to be accessible to, and clearly targeted at, those people the exercise is intended to reach
•keeping the burden of consultation to a minimum is essential if consultations are to be effective and if consultees’ buy-in to the process is to be obtained
•consultation responses should be analysed carefully and clear feedback should be provided to participants following the consultation; and
•officials running consultations should seek guidance in how to run an effective consultation exercise and share what they have learned from the experience
If you feel that this consultation does not fulfil these criteria, please contact:
HM Revenue & Customs
100 Parliament Street
Or email: HMRC Consultation co-ordinator
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