The Rise of the Corporate Structure

ATED (Annual Tax on Enveloped Dwellings) was introduced following the 2012 Budget to close a loophole and ensure that individuals – resident, non-resident and companies – pay their fair share of tax on UK residential property. However, it did not become law until it was introduced on 1st April 2013 as part of the Finance Act 2013. The package of measures introduced by the government were designed to discourage the use of enveloping properties within companies, and encourage the de-enveloping of properties already held by non-natural persons and to tax those who continue to hold them in this way. As such during this period there was a rush to start de-enveloping properties and take them out of corporate structures. However those who didn’t are now starting to see some benefits.

As part of the Finance Bill, for the first time Capital Gains Tax (CGT) was introduced on the growth in the value of properties, even for non-UK resident entities. For clarity, all property held by non-natural persons were rebased in 2013, so any gains accrued before this were written off. As the markets begun to rise, the companies gained latent CGT liabilities, however with Stamp Duty (SDLT) changes, Brexit and subsequent price falls, these pregnant gains have been negated as prices have returned to the levels last seen in 2012/13. As and when the opportunity presents itself, we have seen an increase in interest to buy the corporate entity, by way of SPA (Share Purchase Agreement) rather than just a straightforward asset purchase. The advantage of a SPA is that it is not subject to SDLT and therefore the savings are sizable. With the recent addition of a 3% surcharge for second homes, regardless of where your primary residence is in the world, the saving on a £5m purchase could be in excess of £650k. Vendors benefit as often there is a “sharing” of the saving by way of an increased purchase price.

There are however some disadvantages, you will be subject for ATED charges, which on a £5m property is £54,450 p/a (although on the flip side, the saved SDLT monies can be invested, and at this rate it would take 11 years to break even). Lawyers’ fees can increase threefold, as corporate due diligence is much more in depth than straightforward conveyancing. However it is also undeniable that both solicitor’s and bank’s appetites for this sort of structuring, in light of the government’s anti-avoidance schemes, is waning and as such owning property in this way will only get more punitive.

Every client’s tax position is different, so specialist tax advice is required, and whilst I don’t advocate tax avoidance, for the right client with an appetite for risk, there are clearly some financial advantages.

TBS in Country Life – Roads less travelled

Warwickshire: Cotswold countryside within easy reach of London.

Veer slightly off the beaten bridleways of the Daylesford triangle and head into Warwickshire to find glorious Cotswold countryside within reach of London. Canny buyers are doing just that, finds Arabella Youens at Country Life Magazine. Jonathan Bramwell, Country Head at The Buying Solution comments.

Read Arabella Youen’s full article on CountryLife.co.uk:
Warwickshire: Cotswold countryside within easy reach of London

TBS in the Evening Standard – Where to live in Surrey

Where to live in Surrey: four of the best commuter villages less than an hour from London

Londoners might just be surprised by house prices in some of Surrey’s most picturesque villages, with postcard-perfect settings and fast train links, says Ruth Bloomfield at the Evening Standard.

Read Ruth Bloomfield’s full article on Homes and Property:
Where to live in Surrey: four of the best commuter villages less than an hour from London

Autumn Market – Lack of supply of ‘Best in Class’

It is still too early to evaluate the full impact of the EU Referendum on the UK property market, both at a national and local level. The dramatic turmoil that was expected following the Brexit vote has not materialised and although trading conditions remain tough, interest remains in both the London and country markets, which is indicative that perhaps confidence is returning.

The Brexit vote meant that vendors became more realistic on price which led to an increase in successful sales throughout July and August. The London and country residential markets remain price sensitive although we have noticed an increase in activity, especially amongst needs-driven buyers who want to get on with their lives.  Investors understandably remain more cautious and will only commit when they feel they are getting the right deal.

As we enter into the autumn market The Buying Solution has an active list of motivated clients looking to purchase and we predict frustration amongst buyers as selling agents are reporting a limited amount of new properties coming to the open market. “Best in class” properties set at realistic asking prices are likely to attract premiums as there will be competition for them but those that are unrealistic on pricing will continue to flounder. The lack of supply we are now experiencing could be a temptation for vendors to become more bullish on their pricing but general sentiment amongst our clients is that they will only be prepared to offer if they feel a property is realistically priced.

Stamp Duty (SDLT) has undoubtedly had a far bigger impact on our markets than Brexit, especially with the extra 3% for second home purchases, particularly at the £5m plus level. In the country, buyers of houses with 20 plus acres of grazing or farmland are likely to qualify for “Mixed-Use” which is definitely helping the farms and estates markets as it allows the buyer to claim a reduced rate of 5% on SDLT, even if it’s a second home. International buyers both in London and the country are also taking advantage of a weak pound which often off-sets the increase in SDLT.

Within the London market it is hard to predict if the autumn market will materialise this year. There is little certainty and no rush to make the commitment to buy. The market is currently fairly stagnant and prices continue to slip. There are deals being done, especially at the very top and the very bottom ends of the market where sentiments are very different, but the prime market continues to struggle.

In London the autumn market is likely to see a delay until mid to late October, so the remainder of September is likely to be an extension of the summer buying period and as such may be a good buying month if the right property can be found, as the competition will be less.

The changes in the property market have affected price levels in all areas of the UK and this has meant there is a greater need for client care as many people are unaware of the change in direction and how to use it to their greatest advantage. There is also likely to be an increase in the amount of property offered off-market in the coming months. Retention of a buying agent who will work on behalf of and for the benefit of the buyer, as opposed to the vendor, provides comfort and often much needed counsel in an uncertain market, as well as ensuring access to private offerings.

TBS in the Telegraph Luxury – Going underground

Going underground: the future of the country house?

An English country house is often a chance to “pull on the metaphorical tweeds”, as Nick Mead of The Buying Solution puts it. “Owners leave the bling and high-tech gadgets to their London townhouse and, in the country, opt for lifestyle statements such as slouchy sofas, roaring fires and immaculate striped lawns,” he says.

Read Zoe Dare Hall’s full article on the Telegraph Luxury:
Going underground: the future of the country house?

TBS in the Sunday Telegraph – Gearing up for a road revolution

Gearing up for a road revolution.

Putters have given way to wheels, plus-fours to Lycra. As golf club membership in Britain dwindles, our passion for two wheels knows no bounds, with two million people now cycling once a week. Where once the middle-age aspiration was to overlook the fairway, now it’s all about being near a killer climb, a world-class route and a trendy bike shop, says Zoe Dare Hall at The Sunday Telegraph.

Read the full article for Nick Mead and Katherine Watters‘ comments:
Gearing up for a road revolution

TBS in The Mail on Sunday – The secret estate agents

The secret estate agents.

A shadowy new world of hush hush home sales could save you a small fortune. Most homeowners rely on an estate agent to buy or sell a property, but now many seeking privacy are turning to a new kind of ultra-discreet professional, says Marc Shoffman at the Mail on Sunday.

Read the full article for Mark Lawson‘s comments:
The secret estate agents

TBS in Telegraph Luxury – The new kings of the wrecking ball

The new kings of the wrecking ball.

In many of today’s sought-after addresses, as soon as the Sold signs come down it’s not the buyers who move in: it’s the builders or the bulldozers, says Zoe Dare Hall at the Telegraph Luxury.

Read the full article for Nick Mead‘s comments:
The new kings of the wrecking ball

TBS in Country Life – Safe as Houses

Safe as Houses.

As buyers look to protect the value of their investment in uncertain times, Carla Passino at Country Life Magazine finds the most resilient locations in the English countryside.

Read the full article for Katherine Watters, Bobby Hall and Claire Owen‘s comments:
Safe as Houses