SDLT measures bold, but only for certain investors

The Chancellor has, as expected, announced the extension of the existing temporary relief from Stamp Duty Land Tax ("SDLT") for acquisitions of residential property costing not more than £175,000 for an additional 17 weeks to 31 December 2009.  After that date the threshold will revert to £125,000. There are also measures to facilitate shared ownership and leasehold enfranchisement. 

Stephen Herring, Senior Tax Partner at BDO LLP comments: “Both house builders and purchasers will be disappointed that the Chancellor has not been braver and more generous in light of the pressures on house purchasers to find much higher deposits.”

Perhaps more significantly for the commercial real estate investment sector, as commercial property lending is increasingly influenced by, for example, Sharia compliant ("alternative finance") arrangements, legislation will be introduced in the Finance Bill 2009 to permit the issue of bonds using land assets as security. 

Under these arrangements, the landowner may arrange finance by transferring the land to a bond issuer who at the end of the finance period sells the land asset back to the landowner.  This would, in the absence of relieving legislation, trigger several tranches of SDLT making the arrangement less economically attractive.  The new measures announced would, subject to anti-avoidance legislation, enable the original owner to reacquire the land asset without SDLT arising. 

Stephen Herring continued:  “With both the residential and commercial real estate markets in a depressed state we are starting to see increasing numbers of potential overseas investors requiring alternative finance for their real estate investment.  This new measure will give such investors much more flexibility in their financing arrangements and it is particularly helpful that the "basket" of measures includes reliefs from capital gains tax for the financing transaction and legislation to enable the original landowner to continue to claim capital allowances.”

-Ends-

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