After attending Chartered Accountancy firm, Bishop Fleming's Budget Breakfast Seminar in Truro on Thursday 22nd March 2012 it is my prediction that the commercial property market will slow down as a result of the budget.
The number of concluded transactions in the residential and commercial property sectors will fall because, people won't know what taxes they'll be liable for and it will take quite some time for accountants to go through the new regulations with a fine tooth comb and come up with robust ways for their clients to avoid paying more tax than they need to.
The Government has once again shown its lack of understanding of the property market. I have highlighted three points in the Chancellor's Budget.
Stamp Duty - The Chancellor has announced that residential property over £2 million bought "in a corporate envelope" will be subject to a 15% increase in Stamp Duty and that any residential property ordinarily sold for more than £2 million will become subject to a 7% Stamp Duty charge.
It would appear if the property is not being used for straightforward residential purposes you can mitigate the impact of Stamp Duty by simply turning part of the property into an office for business use, thus avoiding the higher tax rate.
Uncapped Tax Reliefs - George Osborne said that a limit on currently uncapped tax reliefs would apply from 6 April 2013. From next year, anyone seeking to claim more than £50,000 of these reliefs in any one year will have a cap set at 25% of their income, or £50,000, whichever is greater.
It is unclear, however, what tax reliefs the new cap will affect. If, for example, a retailer has suffered losses over the last couple of years, he or she will no longer be able to take those losses forward, putting greater strains on their cash flow.
Capital Allowances – Changes to Capital Allowances from April 2012 include a reduction in the Annual Investment Allowance from £100,000 to £25,000.
Most business owners will be familiar with the concept of claiming Capital Allowances on the items of plant and machinery actually used in the business itself, for example computers, printers, tills, manufacturing machines. However, it is less well known that Capital Allowances can also be claimed on certain embedded fixtures within the building itself, like lifts, air-conditioning, toilets, electrical and cold water systems.
Companies who would have been spending substantial sums on fitting-out buildings and then claiming their Capital Allowance have seen that reduced by 75%.
Brian can be contacted on 01872 247009