Like everybody else I’m relieved that the UK government has been able to get the coking coal it needs to keep the Scunthorpe blast furnaces working. But what a disgrace that we had to rely on other countries halfway around the world to get that coking coal, when it’s already buried beneath our feet. What would have happened if the US and Australia had said ‘No’? Talk about shooting ourselves in the foot. Stupid!
Whilst Increases in stamp duty land tax taking effect 1st April 2025 are mainly geared towards private residential purchasers, local authority purchasers may not be not immune.
Save where a blanket relief can be claimed or for the very smallest transactions in terms of value, all local authority purchases will be affected by the reduction in the basic stamp duty threshold from £250,000 to £125,000. Add to that the 5% SDLT surcharge which is now added to all corporate residential purchases, including those below the new basic £125,000 threshold. Like every petrol purchase, SDLT can involve a tax-on-tax, particularly where a transaction is standard rated.
All of this is dead money which sucks resources out of tight local authority budgets, which might otherwise be applied towards regeneration. And whilst local authority conveyancers are not expected to have the expertise of a tax accountant, it is important to know enough about the calculation of property taxes to ask the right questions and to be able to query any tax-advice which appears to be wrong. It is about knowing what reliefs are available and being able to structure a complex transaction in the most tax efficient way.
Although there are many different taxes which can potentially affect property transactions, currently the three main property taxes are Stamp Duty Land Tax; Value Added Tax and Community Infrastructure Levy (where the council pays money to itself). We now look at each of these taxes in turn and examine the particular reliefs which are available to local authorities.
Stamp Duty Land Tax
The first thing to note is that different stamp duty land tax rates apply to residential and non-residential purchases. Generally, non-residential rates are more beneficial, not least because the 5% surcharge does not apply.
Although the difference between a residential and a non-residential transaction might seem obvious, that is not always the case. A purchase of a property which combines a mix of residential and non-residential use will be deemed non-residential. And although multiple dwelling relief has now been abolished, a local authority can still achieve a significant tax saving by electing to treat a single purchase of six or more dwellings as non-residential, by utilizing the exemption contained in Section 116(7) of the Finance Act 2003. The main blanket SDLT reliefs for local authorities are:
Even where blanket relief is not available for a complex transaction, it is still possible to reduce the stamp duty liability on a development transaction by structuring it in a way which ensures SDLT is only payable on the land value and not the entire development value of the transaction. Structuring a transaction in this way will generally involve separate standalone contracts for the land acquisition and another for the carrying out of the development, and with the bringing forward of completion of the land-transaction to Golden Brick, or earlier, which is the point at which a development becomes officially recognized as ‘residential ‘ and therefore zero rated for the purposes of VAT(see below). The key reference point when structuring a development purchase has to be SDLTM04015 of the Stamp Duty Land Tax Manual, “Scope – how much is chargeable: sale of land with associated construction contract Para 10 schedule 4 Finance Act 2003, which refers to the decision in Prudential Assurance Co Limited v IRC [1992] when Identifying the subject matter of the transaction for the purposes of stamp duty.
TOGC (Transfer as a going concern), also provides partial relief for some investment purchases, such as the landlord interest in a trading estate which is already fully let and where the local authority is stepping into the shoes of the previous landlord. Where a TOGC applies, SDLT will only be calculated on the net purchase price and not any additional VAT element. However this partial exemption can only apply when both the seller and the purchaser had waived VAT exemption before the transaction completes.
A practical issue for many local authority conveyancers, is how to ensure that tax which falls due on a transaction is paid within the required 14 days to avoid the automatic penalties which will otherwise apply. Any payment has to be correctly referenced so that it can be easily traced by HMRC and avoid follow-up query. Compliance with this 14-day deadline may not be problematic for a conveyancer who already holds funds on account. But it can be problematic for a conveyancer who is dependent on another department to ensure that payment is transmitted in a correct and timely way
Value Added Tax
A primary issue in any complex transaction is not only whether that transaction has been opted to tax but whether it should be opted to tax, to enable efficient recovery of vat on building or other construction costs. That is something which may require specialist tax advice. Remember also that a freehold sale of commercial new build is automatically subject to vat.. For all other cases the issue is whether there has been an option to tax. The default position is that non-residential transactions are exempt from vat. However the standard 20% will apply if it has been opted to tax. In most cases the imposition of a 20% VAT liability will be cost neutral in circumstances where the paying party is able to recover its VAT outlay as an input. Although as we have already seen, the charging of vat on a land transaction also has implications for the calculation of SDLT (see above). The imposition of vat on a property transaction will also be problematic for a charity or housing association which is unable to recover its vat as an input. That is the reason why many housing associations are advised to complete their purchases at ‘ golden brick’, when the transaction becomes zero rated for the purposes of VAT. Such zero rating also makes it easier for that housing Association to recover VAT on its own construction costs.
The issue of VAT on local authority transactions is particularly complex because it cannot be assumed that a local authority will be able to recover all of its VAT outlay, which in turn is dependent on whether the particular transaction can be classed as business, non-business or exempt. Official guidance on these issues is provided by VAT Notice 749: Local authorities and similar bodies, which helps local authorities and other public bodies decide which activities are business or non-business. Again, this is an issue on which specialist tax advice may be needed.
Community Infrastructure Levy (CIL)
Whilst affordable housing development by a registered social landlord will normally qualify for mandatory relief against CIL there are special rules for claiming it. The general rule is that Mandatory Social Housing Relief has to be officially claimed before the development commences and then only by an organization which is either the freeholder or which has a significant leasehold interest in the land affected. This is something which needs to be borne in mind when a local authority is working with a development partner which has yet to acquire its proprietary freehold or leasehold interest in the property but is still contractually obliged to get its development underway. In those situations it may be the local authority itself and not the development partner which has to make the formal application for that relief.
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V. Charles Ward Is a Senior Property Lawyer with HB Public Law and author of Local Authority Conveyancing Law and Practice (UK)
My heart always sinks when I see news footage of hobby eco-protesters standing outside a court building, waving placards, and celebrating the stalling of yet another commercial project. This time It was the Rosebank oil exploration project, off Shetland, in which Shell had invested £800 million and involved one of the largest undeveloped oil and gas fields in the UK continental shelf, containing an estimated 300 million barrels. And why do our most senior judiciary seem to think it is their mission to wave their green credentials to tease out the tiniest administrative flaw in the regulatory approval process, to send everything back to the drawing board? Who appoints these people? It follows hot on the heels of another court judgment crushing implementation of proposals to open Britain’s first new coal mine at Whitehaven, for more than 30 years. In each case, the judicial mantra was the same. “That the proposals failed to adequately assess the greenhouse gas emissions tied to burning fossil fuels.” And we know that with a government energy minister so opposed to fossil fuel extraction, that none of these projects are ever likely to happen. But haven’t these eminent legal brains slightly missed the point?
Yes – we know that burning fossil fuels causes climate change. Which is why we need to put in place viable alternatives .But neither the Rosebank nor the Whitehaven projects were about burning fossil fuels. They were about extracting fossil fuels so that we don’t have to import them from abroad. Either way. fossil fuels will still be burnt, because at the moment we have nothing else. And of course those projects would have also created thousands of well-paid jobs. So what is the point they are making? And it is entirely appropriate for me to refer to these eco-protesters as hobbyists, as none of them would have suffered direct personal detriment as a result of either of these projects. It is all about the big abstract ‘we’. And what message does it send to the outside world? A Britain which is so up itself that it is prepared to cut off its nose to spite its commercial face. Who would want to invest in us? The next big battle is going to be about the proposed third runway at Heathrow Airport. Even if it goes ahead, I’m not sure that I will still be around when it is completed. But that’s no reason not to support it.
I really blame the last conservative government for this farce. They had 14 years to drive these projects through. But instead they preferred to spend their time posturing about Brexit and their precious Rwanda scheme, as everything else around them fell apart. And they were a government which was in hock to the NIMBY lobby, which is why the cost of HS2 ballooned almost to the point of cancellation.
When it comes to the third Heathrow runway, I’m with Rachel Reeves. I know she’s had a bad press, but I’m convinced that she’s trying to do her best to grow the British economy. Again, so different from the last lot, the ‘party of business’. But even now, opposition to the third runway is cranking into gear, not least from London Mayor Sadiq Khan, who has promised court proceedings to try to stall the project.
Spending my money to fight a court case against his own parliamentary party? What is that all about? And he hasn’t even consulted me. A case of public money fighting public money. How wasteful. But that is Britain today.
Earlier this week I took delivery of a letter-scale. It joins my laser printer as well as my scanner; computer monitor; headphones; wired mouse and keyboard. I bought it because I just can’t be bothered to stand in line at our local sub post office behind a long queue of people spilling out of the door and only one person serving. It’s never used to be like that. There were always at least two people behind the counter and the queue moved quickly. Not anymore. And I also read in the news of plans by the post office to close its remaining crown post offices in city centres
I had a letter to post. It was not valuable. It did not require a signature. But it was bulky because it contained a book. So I went to a couple of local sub post offices because I wanted to hand it over the counter and pay the correct postage. In the end, I gave up. So it sat on the shelf for a week whilst I decided what to do with it. Anyway, the scale arrived and I was able to calculate the postage myself and put on the required number of stamps and drop it into the nearest pillar box. Job done.
I had thought about trying the post office’s advertised door-collection service. But I didn’t fancy waiting indoors until the postman arrived. Though maybe I’ll try using it if I have a recorded delivery letter to post.
The long and short of it is that I won’t be going to my local post office anytime soon. In fact, if things carry on as they are, I’m sure that the next official announcement will be the closure of the remaining local sub post offices.
Like everything else in the UK, it’s all gone down the pan. And after the scapegoating Horizon computer scandal, who would want to be a sub postmaster?
It seems strange that in today’s corporate world, the only people to have full secretarial support are those who are least likely to need it. They are the captains of industry who spend most of their time in meetings instead of sitting in front of a screen pushing out documentation in volume. For the rest of us, it’s about making the best of what limited support is available to us. One of the positives coming out of the covid lockdowns was a permanent change in working habits, which means that we can do more of our work from the back bedroom instead of traipsing through the morning and evening rush hours. Who would want to go back to that? It was also fortuitous that this change in working habits coincided with technical developments which enable us to meet on teams at the moment’s notice instead of taking an afternoon out of the office to meet face to face. So what has all this got to do with New Year’s resolutions? Just this! In conveyancing, time is money. A delayed completion often means a delayed rental stream or a delayed capital receipt. And everyone loses.
If progress on a transaction stalls completely, other things will supervene and it will begin to unravel. One of the issues I have with traditional time recording is that it rewards inefficiency, with the slowest most inexperienced fee earner charging out the most time for a transaction. When it should be all about unit-cost, meaning that the faster you are able to work without compromising on quality or accuracy, the better value you are providing to your corporate client. In this post, I provide suggestions for ten New Year work-resolutions which can help you become one of the most efficient conveyancers in your team, simply by making the best use of the resources which are available to you . Here they are:
BRUCE AND HOLLY 