BUDGET 2016: The British Property Federation has warned against an “unravelling of logic”, following the chancellor’s announcement to cut stamp duty on commercial properties valued at up to £150,000 to 0% – in line with residential SDLT.
Commercial properties valued at up to £250,000 will pay 2% SDLT while those valued at above £250,000 will pay 5%.
George Osborne said the new rates would raise £500m a year, but would see 90% of investors in the commercial property industry pay less tax.
BPF chief executive Melanie Leech said: “Development in places like the northern powerhouse and Midlands engine will now be held back as a result of this out-of-the-blue raid on commercial property transactions.
“Over a decade ago, the government of that time decided to decouple the commercial and residential rates of SDLT recognising that the sectors were driven by very different factors and there was no logic in charging the same rates of SDLT on commercial and residential property.
“We can only hope that today’s announcement isn’t any unravelling of that logic.”
Elizabeth Bradley, head of the corporate tax team at law firm Berwin Leighton Paisner, said the property industry would be “disappointed” by the changes.
“The property sector is effectively being used to placate the government’s back benchers.
“The chancellor has acknowledged the need to build more homes, but the extension of the extra SDLT rate on buy-to-let to large investors will discourage investment in the private rented sector,” she said.
BNP Paribas chief executive John Slade also called the changes “disappointing”, saying they would reduce liquidity in the commercial property market.
Phil Nicklin, real estate tax partner at Deloitte said: “Although SDLT is a tax payable by purchasers, it may well be that sellers end up having to absorb part of the increase through a reduction in sales price”
Neil Blake, head of EMEA research at CBRE said the changes would come as some relief to smaller property owners, but were effectively a “tax grab” for the chancellor.
He added that while the rules could have some impact on offshore property investors and developers, if the chancellor was right about the UK being the fastest growing economy in 10 years, it would continue to be an attractive investment prospect.
Other property professionals cautioned that the change would cause investors to lose money.
Mark Tighe, managing director of capital allowances tax company Catax Solutions, said the reduced stamp duty on commercial property would drive demand, but the resultant increase in transactions would potentially cost billions as largely unused tax relief was lost.
He added: “Capital allowances are a highly valuable tax relief available to owners of commercial property but under current legislation they are irrecoverable if they are not identified and realised at the point of sale.”
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