Conveyancing industry voices their concerns over lack of SDLT extension
There was widespread disappointment across the property industry last week following the Chancellor’s spending review which omitted an extension to the current stamp duty holiday.
Conveyancers, estate agents, surveyors and property sector bodies were hoping that the Chancellor would extend or at least taper the deadline beyond 31st March to avoid homebuyers going off a ‘cliff edge’
At the end of last month, property sector industry bodies collaborated and sent an open and frank letter to the Chancellor urging him to extend the stamp duty land tax (SDLT) holiday. After the coronavirus restrictions were lifted the sector experienced an unprecedented mini-boom where log-jams appeared in the transaction pipeline which put conveyancers under huge amounts of pressure to ensure transactions progressed as smoothly as possible.
Now with the current delays, professionals in the industry feel many transactions will not complete before the 31 March deadline – with many conveyancers now managing client expectations.
This month, key industry bodies, The Conveyancing Association, The Society of Licensed Conveyancers and the Bold Legal Group have once again sent another open letter to push the Chancellor to extend SDLT holiday.
The latest figures from HMRC estimate that a total of 105,630 residential transactions took place this October, making it the busiest October recorded in at least a decade. The number of homes that changed hands in October 2020 was 9.8% higher than the previous month.
Furthermore, new research found that 18% of Brits, equalling over 2.1 million people, were only able to get on the property ladder as a first-time buyer because of the recent stamp duty holiday, according to nationally representative research conducted by Stamp Duty specialists Cornerstone Tax.
In addition, 14% of Brits (1,926,000 people) have been forced to take out short-term loans or emergency credit to cover the cost of unexpected stamp duty payments. And 52% of Brits (18,456,000 people) feel there should be an independent office set up that audits stamp duty transactions to ensure people pay the right amount and not too much.
David Hannah, founder of Cornerstone Tax commented on the SDLT holiday. He said:
……”What is absolutely clear is that the government needs to review this stamp duty holiday, and either announce an extension or amend the tax payment date, so that homebuyers can still take advantage of the holiday even if they cannot complete by 31st March next year. The most preferable option would be a phasing out of the holiday, to avoid those who are currently in the process of purchasing their properties, essentially being thrown off a cliff edge……”
Today’s Conveyancer asked other key bodies and experts in the industry their views on the fact that an extension of SDLT holiday did not materialise in the Chancellor’s spending review.
Lloyd Davies, Operations Director at the Conveyancing Association:
“Given the seriousness of the economic situation and the measures that are being introduced, such as public sector pay freezes, I don’t think it was ever likely that the Chancellor would – at the same time – announce an extension of, what is, effectively a tax incentive for those purchasing a home. That doesn’t however mean this was the only opportunity for him to make such a decision. We at the CA have been involved in discussions with Treasury around the current situation, the likelihood of large numbers of transactions not completing before the deadline, and what this might mean for the overall housing market. Plus, no-one wants a cliff-edge situation should the holiday come to an abrupt end on the 31st March next year. There are strong arguments to be made for an extension, not least the overall benefit a healthy and buoyant housing market can deliver for UK plc. We may not have had an extension announced just yet, but I suspect all within the Treasury and the Chancellor himself, are taking this seriously, and as we get closer to the deadline, we believe the case for an extension becomes even more compelling.”
Stephen Ward, Director of Strategy at the Council for Licensed Conveyancers said:
“The CLC has issued an advisory note to conveyancers on how to manage the risks that arise from the current planned cliff-edge end of the SDLT and LTT holidays in England and Wales on 31st March.
“We have written to the Chancellor about the risks to clients and the conveyancing sector. We very much hope that the government will be able to take urgent steps to begin a smoother transition to something more like business as usual for the home buying and selling market, whether through an extension, a gradual tapering of the end to the land tax holiday or other measures that avoid the risks to the market and legal service provision of the 31 March deadline. Leaving an announcement of any such change until close to the deadline will not mitigate most of those risks.”
Commenting on the Chancellor’s decision not to extend the Stamp Duty holiday in the Spending Review, Rob Houghton, CEO of reallymoving said:
“Thousands of homebuyers up and down the country are facing the prospect of missing out on the stamp duty holiday if their purchase doesn’t complete by 31st March.
“In practical terms we will see a rapid worsening of the current bottleneck in the conveyancing process as everyone rushes to complete by the deadline, with many transactions inevitably delayed as solicitors struggle to cope. This will cost buyers thousands in stamp duty they haven’t budgeted for, in many cases making the move unaffordable and causing chains to break down.
“The housing market has been absolutely critical in keeping the economy moving over the last few months and there’s no doubt further challenges lie ahead, with unemployment rising and economic growth in decline. When someone moves house it’s not just the estate agent who gets paid – it’s also the solicitor, the financial advisor, the surveyor, the removals firm and often the cleaner, the electrician, the furniture shop and so on. There’s very little else that promotes spending in such a far-reaching way.
“Coinciding the end of the stamp duty holiday with the end of the current furlough scheme could have a serious impact on the economy. Extending the holiday would have helped support the housing market, promote economic activity and preserve people’s financial security at a critical time.”
Bryan Mansell, Co-Founder at Gazeal, comments:
“The Chancellor’s Spending Review inevitably focused on funding for public services in light of the Covid-19 pandemic. The property industry will have been calling out for updates on the stamp duty holiday, but will be pleased to see a funding announcement on how the government intends to rectify the UK’s housing shortage.”
“Although it comes as no surprise that an extension to the stamp duty holiday was not referenced by the Chancellor today, we are getting closer to the cut-off point so more clarity is needed.”
“An extension to or gradual tapering off of the stamp duty holiday would help to ensure that consumers don’t miss out on significant tax savings and the pressure on property professionals is reduced. Extra breathing space would also help the industry to work through a huge backlog of transactions built up in recent months.”
“What’s more, an extension to the stamp duty holiday would help to stimulate the housing market throughout 2021 when it will be up against tough economic conditions. Further stamp duty measures could also help to avoid a sharp drop-off of property supply and demand in April.”
“Whether or not the government intends to extend the tax break beyond next March, a decision needs to be made public soon so that estate agents, conveyancers and consumers can prepare for what is ahead.”
“In the meantime, all parties must focus on communicating effectively and making sure they do everything they can to minimise fall-throughs and maximise secure transactions so that as many people as possible benefit from the tax cut.”
“Last year, the government announced a target of building a million new homes over the next five years and pledged to increase housebuilding levels to an average of 300,000 new build homes per year by the mid-2020s.”
“Of course, the impact of the pandemic will make it harder for these ambitions to be achieved. It is therefore pleasing to see a pledge of £20 billion to support new housing from 2020-21, including the introduction of a £7.1 billion National Home Building Fund.”
“The housing shortage is not going anywhere, so hopefully the government’s new strategies will help towardsfunding new homes for the next generation of property buyers.”
“The industry will now look ahead to next year’s Budget for the announcement of further property market measures, which could include changes to stamp duty and a proposed doubling of Capital Gains Tax.”
Neil Cobbold, Chief Sales Officer at PayProp, comments:
“Understandably, today’s Spending Review focused on funding for public services in light of the ongoing COVID-19 pandemic, even if the property industry had hoped that the Chancellor would use the address to provide clarity on issues such as the stamp duty holiday and proposed changes to Capital Gains Tax (CGT).
“In recent weeks, there have been many calls for the stamp duty holiday to be extended. A longer period for property buyers to benefit from significant tax savings would provide the market with a welcome boost as we approach the New Year and the effects of record-breaking sales volume this summer start to wear off.
“A stamp duty holiday extension would also encourage further investment in the private rented sector (PRS), potentially leading to much-needed new homes for tenants entering the market.
“Meanwhile, it appears the government is still reviewing the recent proposals made by the Office for Tax Simplification to double CGT rates and lower the number of exemptions.
It seems unlikely that a decision on this proposal will be made in the near future as the government’s focus remains on managing the impact of the pandemic.
“However, if changes to the CGT system are made in the future, due consideration should be given to the impact they could have on buy-to-let landlords and property investors.
Doubling CGT rates could have the unintended consequences of a mass buy-to-let sell-off and less future investment in the PRS. The government needs to raise revenue to fund its response to the pandemic, but it can strike the right balance without severely affecting sectors like the PRS which provides homes for millions of people.”