Following the Chancellor Philip Hammond’s first Autumn Statement, Rebecca Wilkinson – Business Tax Partner and member of Menzies Property sector team – has reviewed the announcement in line with their impact upon the UK Retail sector.
After the lack of success of Cherie Blair’s attempt to get a full judicial review of the restriction of mortgage interest deductibility for buy-to-let landlords, some landlords may have been clinging to a glimmer of hope that Philip Hammond would announce an easing of these measures. Unfortunately, and perhaps unsurprisingly, this did not happen. Instead the Chancellor announced a ban on letting agent fees. Letting agent fees are traditionally charged to tenants to cover administration costs, such as carrying out credit and immigration checks, arranging for the signing of contracts and checking references. Letting agents who are no longer able to charge tenants for these services will no doubt attempt to pass the costs on to landlords, who in the face of extra tax burdens, may be forced to pass the costs on to tenants in the form of increased rents. Some letting agents however, are speculating that landlords will simply refuse to pay these fees, as they should be covered in the commissions they already pay to agents. It is not yet known when the ban will take effect but landlords should check any arrangements they have with their letting agents to assess whether these costs are going to be passed on.
There was disappointment for residential property developers who were hoping for some kind of relief from the 3% SDLT surcharge. Sadly, no such relief was announced and developers are left facing increasing costs when acquiring residential sites to develop. The 3% surcharge seems contrary to the Government’s ambition to deliver up to 100,000 new homes by 2020-21, as it can make the purchase of suitable sites unaffordable for smaller developers who often acquire existing residential properties with the aim of increasing the number of dwellings on the site.
On the plus side, Philip Hammond did announce a £2.3 billion housing infrastructure fund and committed to investing £1.4 billion in 40,000 new affordable homes. In addition, £3.15 billion will be invested in London to build a further 90,000 affordable homes. It is not yet clear when the funding will become available and what the criteria will be for applying for grants, although it is understood that some restrictions will be lifted.
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Get more input on the 2016 Autumn Statement implications for the Property & construction sector by speaking to our sector team.