HMRC stamp duty clarification to give landlords significant rebate windfalls

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Landlords who have bought mixed-use properties could be due a big windfall after HMRC clarified stamp duty payment rules

HMRC says that when claiming the relief on purchases of mixed-use buildings, tax should be calculated without using the 3% surcharge, even for purchases made by companies.

This means that the effective tax rate might be lower than 3% and those who claimed the relief within the last four years (having paid tax including the 3% surcharge) are due a refund.

When buying a building with retail premises and four flats above it for £1.5m, landlords will now save £27,000 in stamp duty surcharges, according to tax advisers Blick Rothenberg.

If the commercial unit is worth £150,000 and the residential units worth £1.35m, then £19,950 of stamp duty would be payable – made up of £13,500 due on the flats plus £6,450 on the retail premises.

In the past, £40,500 would have been charged on the residential properties, bringing the total tax bill up to £46,950.

The clarified rules will also make it more attractive for landlords to buy mixed use buildings in future, according to partner Sean Randall (pictured), who says it’s good news for buyers of mixed use buildings, irrespective of the size of the residential element.

He adds: “A significant tax saving may be due, for example on a single mixed use building containing four flats, as well as on a purpose-built private-rented sector development containing 2,000 flats.”

Read more about stamp duty.

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PROPERTY PIONEERS: Meet the WeChat king of UK’s Chinese buy-to-let community

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The UK property market will remain popular with Chinese investors despite Covid and Brexit, according to the UK Chinese Landlords Alliance.

It’s confident that the Chinese community will continue to see buy-to-let as a relatively safe investment and, as they work and save hard, they’ll still have the necessary capital to buy a wide range of properties around the UK.

Junhua Zhu, the Bromley-based founder and chairman, tells LandlordZONE that the Chinese community are mainly anti-Brexit, after experiencing divisions and civil wars in their own country.

“There was a drop in interest after the vote because overseas investors were nervous and most are still concerned about how it will work, but I believe confidence will return in the next few years,” says Zhu.

Zhu first started sharing his experience of building up a property portfolio in the UK on WeChat, the Chinese multi-purpose messaging, social media and mobile payment app.

“My popularity grew as people realised I knew what I was talking about,” he explains. “I then started my own group which grew really fast and I now run seven groups with between 2,000 and 3,000 people following me.”

Malaysia

About 80% of members are based in the UK, with the rest mainly in China and Malaysia – almost all are ethnic Chinese.

Those based overseas or who are less confident tend to invest in modern blocks and use agencies to manage properties, says Zhu, while those working here buy larger houses that generate more income.

He recognises that as English isn’t their first-language, it can be hard for some to navigate the buy-to-let process, and as flats are the norm in China, he gives potential investors insight when they’re looking to buy larger houses.

As relationships in the alliance have formed, some members now make joint investments, and as its profile has grown, property developers regularly approach it to discuss possible opportunities. “As the economy isn’t going to rocket soon, after Covid, property in the UK is a safe investment,” he adds. “As we don’t see interest rates going up, even if the market doesn’t boom, our costs are under control.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – PROPERTY PIONEERS: Meet the WeChat king of UK’s Chinese buy-to-let community | LandlordZONE.

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Scotland to introduce EPC Min Band D

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The Energy Efficiency (PRS) Regulations which were to be enacted this year are now to be introduced next year with the Min EPC rating being Band D w.e.f. 01 Apr 2022 on new leases and by 31 Mar 2025 for existing leases.

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Tenants using evictions ban as ‘green light’ to stop paying rent

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Some tenants are using both the evictions and bailiff ban as a ‘green light’ to stop paying their rent even when they are able to afford the payments, it has been claimed.

ARLA Propertymark has made the comments within its submission to the ministry of housing’s investigation into the impact of Covid on the private rental market.

“This means that many landlords face extended non-rent payments with no reasonable certainty of how to recover costs,” it says.

“A second wave could make these cases much worse and lead to the landlords who are experiencing problems selling their properties and leaving the sector altogether, reducing the number of homes people can rent.”

ARLA has also published shocking figures that reveal the huge impact on landlords since the evictions ban was introduced including that, despite the courts re-opening, many landlords – except in the most extreme cases – face a nine-month wait to gain possession of their properties.

A survey of ARLA’s lettings agency members revealed that half said their landlord clients had issued a Section 21 notice to at least one of their tenants in September, a figure which increased to 55% in October.

Rent arrears

“The two main reasons for serving these notices were rent arrears and landlords wanting to sell their property,” says ARLA.

“Our Private Rented Sector Report from September shows an increase in the number of landlords selling their buy-to-let properties and the figures are the highest we have on record for the month of September.”

Like the National Residential Landlords Association, ARLA is calling for the government in England to copy its Welsh counterpart and introduce a government-backed interest-free loan to help tenants clear their rent arrears.

Find out more about how to evict.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Tenants using evictions ban as ‘green light’ to stop paying rent | LandlordZONE.

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Mixed messages coming from the housing market…

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House prices have risen at the fastest rate in six years according to figures produced by the Nationwide Building Society, but experts are predicting a sharp decline in 2021.

Defying chancellor Rishi Sunak’s rather gloomy forecast that we are only at the start of a huge “hit” to the economy, house prices rose by 6% year-on-year in November.

The market has been buoyed by the stamp duty holiday due to end in March next year, and the short term rush to get sale completions though by then. Will the stamp duty holiday been extended next year, many agents are asking?

Given that there there is a huge back-log of property searches going though at the moment, and solicitors’ work is overloaded, it could result in lots of disappointed buyers missing the deadline.

Chief economist at the Nationwide, Robert Gardner, has stated that the outlook is “highly uncertain” and that housing market activity could slow, “perhaps sharply, if the labour market weakens as most analysts expect, once the stamp duty holiday expires”.

Andrew Wishart of Capital Economics is predicting a 5 per cent fall in house prices next year as the furlough scheme ends in March, along with the stamp duty concession. “We aren’t expecting a house price crash… With a vaccine likely to be rolled out in the first half of 2021, we think that the economy and employment will recover quickly, preventing a prolonged fall in prices”

Signs of Recovery in Construction

Recent research on the construction sector carried out by Marco Verdonkschot, Managing Director at IronmongeryDirect, specialist ironmongery suppliers, paints a relatively optimistic picture for house building in 2021.

“2020 has been a year like no other, with every area of life facing incredible challenges and disruption. The construction industry is certainly no exception to that and has had to deal with unprecedented levels of cuts and job losses. However, it is ending the year strongly, so there is certainly hope for a full recovery in 2021,” says Verdonkschot.

“The pandemic has hit the industry hard, with the lockdown causing construction output to plummet. In April, it fell by a staggering 40.2% – the highest monthly fall since such records began in 2010. However, since that drastic fall, output has increased every month. Between May and June, it grew by 23.5%, which was also a record.

“While output remains down year-on-year, in September, it was only 1.8% below that in March, when restrictions were first put in place. In fact, output in certain sectors, such as Repair and Maintenance, Private Housing and Infrastructure, have already recovered to March levels, which is great to see.

“As the situation has improved, the average number of hours worked has risen, which is a really healthy sign. Between July and September, the typical construction employee worked 30.7 hours a week. Since the start of lockdown, when this figure dropped as low as 26.6, it has risen continuously. This has led to rises in weekly earnings, from a low of £577 in April, to £642 in September.

“With increases in the amount of new work, it’s not surprising that construction firms are starting to hire again. Between August and October, there were 27,000 job vacancies across the UK, which is nearly 240% more than between April and June, when there were just 8,000 spots available.

“During the more difficult months, lots of construction companies took advantage of the government’s Job Retention Scheme. The latest data shows that £3.5 billion of claims have been made so far. With the Chancellor extending the scheme until March 2021, many will continue to rely on it, but the number has been falling rapidly since April, when over 720,000 construction workers were furloughed. In August, there were just over 185,000 people being supported by the government, which is 74% less than when it peaked.

“One interesting result of the pandemic is a slight increase in the number of self-employed workers in the industry. Many people decided to set up on their own after being made redundant or realising they wanted a fresh start. The number of individuals registered as self-employed in both the construction of buildings sector and specialised construction activities rose between March and June this year, by 1,000 and 6,000 respectively.

“The vast majority of these new self-employed workers are women, with an increase of 10,000 across these two areas. In contrast, there were 2,000 fewer men registered as self-employed in these sectors in June than in March, so it is definitely female construction workers leading the charge in this space.

“Overall, after a really difficult year, there are definite signs of recovery, with output and job vacancies increasing, and the number of furloughed workers dropping considerably. While the rate of recovery will inevitably slow after record growth, hopefully it won’t be long before we are back at pre-lockdown levels.”

[1] https://www.ons.gov.uk/businessindustryandtrade/constructionindustry/bulletins/constructionoutputingreatbritain/latest

[2] https://www.ons.gov.uk/employmentandlabourmarket/peoplenotinwork/unemployment/datasets/vacanciesbyindustryvacs02

[3] https://www.gov.uk/government/publications/coronavirus-job-retention-scheme-statistics-october-2020/coronavirus-job-retention-scheme-statistics-october-2020

[4] https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/datasets/selfemploymentjobsbyindustryjobs04

[5] https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/datasets/averagehoursworkedbyindustryhour03

[6] https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/datasets/averageweeklyearningsbyindustryearn03

IronmongeryDirect.co.uk has been supplying architectural ironmongery to tradespeople for over 50 years and now has the UK’s biggest range with over 18,000 products, including top trade brands.

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Government must respond to Extend the Stamp Duty Holiday petition

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A petition to extend the Stamp Duty Holiday for an additional 6 months after 31st March 2021 has now reached the 10,000 signature threshold where the government must officially respond. This response is expected in the next 3 days.

The Chancellor Rishi Sunak has been under pressures from all sides of the Housing Market to extend the holiday and avoid a cliff-edge that is pinching completions into a compressed deadline with an estimated 325,000 existing agreed purchases that may not happen before this date.

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How to insure with no company let tenancy agreement?

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I am reaching out for some advice from the wise members of this forum. A property I own is a residential property let to a company. The tenancy agreement is up for renewal imminently, but the tenant won’t sign another one until AFTER the imminent renewal date.

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