Well, was it a budget for property?
Lawrence Brown, Partner at Scotts, considers the implications of George Osborne’s fourth budget
As he does every year, the Chancellor of the Exchequer produced lots of statistics, percentages and talked about revenue and expenditure in the billions of pounds which was enough to make your head spin.
Somehow the business community has got to make sense of what was said, cut through the policies and tax cuts introduced to win over an increasingly disillusioned electorate and ask “How will the budget affect business in this area? “
Firstly he announced Capital Gains Tax relief for sales of businesses to employees. Often the most obvious purchaser of a small business is one or more of its employees, but owners can be put off from selling because of their tax liabilities. By cutting this tax an owner may be more encouraged to sell, as such an employee becomes a business owner, they invest in the business, by doing so they preserve long established local names and hopefully create increased employment opportunities.
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Next he acknowledged that Social Enterprises are an increasingly important sector in our local economy. Typically they have relied upon central Government funding for their creation and, often, their continued existence. As they have an altruistic aim private investors have been wary of investing in them particularly as they are taxed accordingly. The introduction of tax relief for private investment into social enterprises will hopefully bring about growth in this sector and an increase in the local economy.
The most radical proposal was the introduction of the “Help to Buy” scheme (sounds very similar to Mrs Thatcher’s ‘Right To Buy’ scheme from the 70s). In a nutshell the Government will provide up to 20%, on a shared equity basis where a purchaser puts in 5% of their own money, as a deposit for the purchase of a newly built house. For local house builders this has to be great news and will hopefully stimulate more activity in this sector to provide much needed housing. The Chancellor put a cap on the value of the new home at £600,000 but it’s doubtful whether that will affect too many people in this area!!
He also announced the creation of a new Mortgage Guarantee. Essentially the Government acts as a guarantor for anyone who would not normally be able to get a mortgage and this is not only limited to new houses. The devil will always be in the detail but if there’s not too much red tape then both these initiatives should help to bring about more activity in the housing market. In turn this leads to more construction jobs, more money in the supply chain and a greater boost for the local economy.
How does this affect the property industry? Well, every business should take advice about rents, business rates and strategic asset advice. If they’re looking to invest and grow then it is even more important to do so. Cost efficient, appropriate premises help business to cut their costs of operation and increase their profits. The Chancellor thinks he’s done his bit by tinkering with the tax rates, the property industry can do its bit by advising clients well and hopefully we’ll start to see some growth in the local area.
In the meantime we’re off to take advantage of one tax cut he announced - a penny of the price of a pint of beer.