The new proposals include increasing the rates by 3% from 1 April 2016 on second homes, buy-to-let and other additional residential properties purchased by individuals; residential properties purchased by trustees apart from where there is a life interest or interest in possession; and residential properties purchased by corporates or collective investment vehicles.
An exemption where there has been a bulk purchase of at least 15 residential properties in one transaction has been mooted, as has one where a company owns 15 properties already.
The consultation document states that the higher SDLT rates will apply to most purchases above £40,000 of additional residential properties in England, Wales and Northern Ireland. Around 10% of transactions are expected to be affected.
Mark Webb continued:
“The key issue affecting corporates is any available exemptions. The government is considering an exemption from the higher rates, with the possible intention of targeting this at cases where there is a bulk purchase of at least 15 residential properties in one transaction. It is seeking evidence to as to whether making such an exemption available to individual investors as well as non-natural persons would support the government’s housing agenda.
“The intention otherwise is that the first purchase of a residential property by a company or collective investment vehicle is subject to the higher rates of SDLT. Thereafter, as purchases of further properties would also be subject to the additional 3% charge, apart from where bulk purchases can be made, this would add a significant uplift in costs for corporates.”
“While appreciating that the new proposal may encourage investment in new sites, increasing the stock of housing, it will do little to encourage corporates and funds to invest in and improve other housing, such as small holdings being sold off by individual landlords trying to leave the industry. Where such properties are bought up by institutional investors, such as REITS, which the Government seems to want to encourage, the additional SDLT charges are likely to lead to higher rents rather than additional supply.
“It should be recognised though that all options appear to remain open. The consultation has asked for all comments around an exemption and we expect funds, individuals and companies owning significant amounts of property or contemplating significant investment to argue that an exemption should apply.”
