Pre-budget advice

Many economists believe that, faced with a budget deficit of £35 billion this year, Gordon Brown may well be inclined to raise taxes once again in the November pre-budget statement. Property investors and owners would do well to take professional advice in light of potential legislation.

One change of which we can be certain, is that Stamp Duty is to be replaced by Stamp Duty Land Tax (SDLT) for land transactions, probably with effect from 1 December 2003.

It was confirmed in the Spring Budget that SDLT will be charged at the same rates as stamp duty for purchases of land and buildings.

In the UK, houses selling for more than £250,000 are currently subject to 3 per cent stamp duty, while those selling for more than £500,000 are subject to 4 per cent. As a result of existing levels, Stamp Duty saving schemes have become a feature of many higher value transactions. Most, if not all, of these schemes will cease to be effective under the new SDLT regime, the tax being a tax on transactions, not a tax on documents.

SDLT propels the tax on the grant of new leases into a different league. Instead of a charge based on the average annual rental at a rate that reflects the length of the lease, the new SDLT will be levied at 1 per cent of the net present value of total lease rentals payable under the lease at a discount rate of 3.5 per cent.

To illustrate, a 25-year lease with an annual rent of £15,000 (including VAT) per annum, incurs Stamp Duty of £300. The same lease granted under the SDLT regime will attract tax of £2,472 – more than eight times the Stamp Duty liability!

The most obvious way of ensuring that a property transaction will fall under the existing Stamp Duty regime is to ensure that completion takes place before 1 December 2003. Where this is impossible, transitional rules relating to transactions that complete after 1 December 2003, variations of contract and the date of Royal Assent (10th July 2003), may provide protection. A variation to the agreement to lease after 10th July removes protection under the transitional rules and depending on values it may be better to enter into a lease in its original form, with a subsequent variation, thus avoiding SDLT.

A further point to note is that conveyances and leases for non-residential properties in Disadvantaged Areas are now exempt from Stamp Duty without limit, and will be exempt from SDLT as well. However, the rules governing this are not straightforward. For example, if six or more separate dwellings are sold in one contract then they all qualify as non-residential.

We are well placed to consider with our clients and their specialist advisers the problems that may arise out of the pre-budget statement and the means of reducing tax liability. For more information, contact Tim Kirkwood at our Inverness office on 01463 224343 or email: tim.kirkwood@ckdgalbraith.co.uk.

Sporting Brochure

We are pleased to advise that our 2004 Sporting Lets brochure will be available in early November. For a copy, please contact our Sporting Department in Perth on 01738 451600, or by email sporting@ckdgalbraith.co.uk.

You may also wish to view our sporting web site www.sportinglets.co.uk

CKD Galbraith Forthcoming Events:

Unlocking Values from Farms and Estates
CKD Galbraith is to host two joint seminars in partnership with leading Scottish solicitors Turcan Connell WS. Bob Cherry, who leads our Ayrshire and Glasgow agency department, will advise on market trends, farm steading development values, and letting potential.

Jon Robertson of solicitors Turcan Connell will speak on the legal implications of farm steading development.

Dates and locations:
Savoy Park Hotel, Ayr, 18th November, 7.00pm for 7.30pm
Strathblane Country House Hotel, Strathblane, 25th November, 7.00pm for 7.30pm

These events are free to attend. To book your place, please email: vivien.baillie@ckdgalbraith.co.uk or telephone 01292 268181.

To read previous newsletters from CKD Galbraith please click here.

A New Force in Property

CKD Galbraith is a new property consultancy formed through the merger of CKD Finlayson Hughes and Cluttons (Scotland).

The consultancy specialises in serving the needs of private clients. With offices in Edinburgh, Glasgow, Perth, Aberfeldy, Inverness, Ayr and London, our partnership provides the full range of property consulting services across the commercial, residential and rural sectors throughout Scotland. The combined knowledge, expertise and experience of CKD Finlayson Hughes and Cluttons (Scotland) both firms – each enjoying long-established reputations for quality service – has created a national partnership with unrivalled local knowledge.

Services include:

• Sourcing properties
• Surveys
• Appraising and valuing
• Negotiating purchases on the best possible terms
• Residential Property
• Commercial Property
• Forestry Property

For more information please visit www.ckdgalbraith.co.uk