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Property investors could get stamp duty help

Friday, 6 March 2009 11:42 AM

Alistair Darling's Budget next month is set to provide a stamp duty cut for larger property investors.

The chancellor is predicted to change how stamp duty is calculated so investors buying a large number of properties will only pay stamp duty on each property and not on the total investment.

Currently an investor buying ten flats worth £150,000 each would pay stamp duty of four per cent on the total bill of £1.5 million.

If however, the buyer is buying ten flats from ten individuals, then they would have to break the payments down and pay the correct of stamp duty due on each transaction.

However, under the changes set to be announced by the chancellor, the investor would only pay stamp duty on each individual property, even if they are bought in bulk.

With the current threshold of stamp duty at £175,000, an investor buying a large number of properties under this value would not be taxed.

It is hoped the change will encourage larger institutional investors to turn to property - and in particular those taking much longer-term investments and willing to receive lower yields than traditional investors.

Such long-term investors would also be hoped to provide stability to the market and a much needed investment during the property market collapse.

Peter Cosmetatos, finance director for the British Property Federation (BPF), said the current stamp duty rules "seriously deter investment buyers from bulk buying, which seems wrong in policy terms.

"Buying multiple units to be managed together is efficient and rational in commercial terms, but the current rules make it more expensive in tax terms."

He added: "The stamp duty rules should encourage efficiencies of scale in residential investment and support more efficient and professional management of rented residential property.

"That could be done by making stamp duty payable at the right rate for each individual unit, rather than for all units bought together."

He added the BPF had made a powerful case for reform in this area to government and hoped proposals will appear in the upcoming budget.

Elizabeth Brogan, senior policy officer at the National Landlords Association (NLA), welcomed such a change to stamp duty and explained investors buying more than one property were being hit when the total value of an investment was greater than the individual units within it.

"The move would encourage more professional landlords both for larger institutional investors or single landlords building up portfolios."

She also called on the chancellor to introduce capital gains tax rollover for landlords - so they avoid paying tax when selling a property to invest elsewhere as occurs in other businesses.

Ms Brogan also stated landlords should be allowed to make tax deductions for the use of their time, in the same way payments for letting agents are tax deductable.

The plans have also faced some criticism from first-time buyers - feeling preferential treatment for investors will place them at a disadvantage in the property market, when they are already unable to take gain from falling house prices as mortgages are still hard to obtain.

The Treasury has refused to comment on the contents of the Budget, until it is unveiled on April 22nd.

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