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Property Taxation – Time for Reform?. Jeremy Edge Edge Planning & Development PLRG 2011 Programme LSBU Thursday 3rd February. Background. RICS Research Project – Property Taxation Purpose - Engage with Treasury to introduce simplification - PowerPoint PPT Presentation
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Property Taxation – Time for Reform?Jeremy Edge
Edge Planning & DevelopmentPLRG 2011 Programme
LSBUThursday 3rd February
Background
• RICS Research Project – Property Taxation• Purpose - Engage with Treasury to introduce
simplification• Lack of knowledge regarding the magnitude of
tax raised through property• Lack of understanding of the effects of reliefs
and exeptions
The Property Cycle – A Taxation Opportunity
LAND Planning Application Consent Construction EMPTY
BUILDING
Dilapildations Fit Out Lease or Sale
OCCUPIED BUILDING
Lease TerminationDemolition
Remediation
Property Life Cycle
Commercial Property Taxation Opportunities
Residential Property – Life Cycle
LAND Planning
Construction EMPTY PROPERTY
Social landlords
Owner Occupier
Buy to let
occupylease
lease
Residential Property Taxation
LAND Planning
Construction EMPTY PROPERTY
Social landlords
Owner Occupier
Buy to let
occupylease
lease
VAT on feesPAYE & NI on salaries
S106 costsS278 costs
CIL
VATPAYE & NI
Corporation TaxTransport TaxesInsurance Tax
Supply Chain
SDLTCGT
VAT on fees
Council Tax
SDLTCGT
VAT on fees Council Tax
VATPAYE & NI
CorporationTax
Council Tax
Council Tax
Occupational tax – regardless of ownershipA variety of exemptions exist, such as those detailed below:• The property is empty• Only one adult lives there• The occupier is disabled• The occupier is a student• Low income families can also qualify for council tax benefit
Council Tax Bands
Band Value Ratio Ratio as % Average
A up to £40,000 6/9 67% £845
B £40,001 to £52,000 7/9 78% £986
C £52,001 to £68,000 8/9 89% £1,127
D £68,001 to £88,000 9/9 100% £1,268
E £88,001 to £120,000 11/9 122% £1,550
F £120,001 to £160,000 13/9 144% £1,832
G £160,001 to £320,000 15/9 167% £2,113
H £320,001 and above 18/9 200% £2,536
Council Tax – Geographic Value Distortion
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
North East North West
Yorkshire and The Humber
West Midlands
East Midlands
East of England
South West
South East London Wales Scotland
Band A Band B Band C Band D Band E Band F Band G Band H Band I
Stamp Duty Land Tax
RESIDENTIALValue up to: Rate
£125,000 0%£250,000 1%£500,000 3%
Top rate (£500,000 +) 4%NON-RESIDENTIALValue up to: annual rent Rate
£150,000 < £1,000 0%£150,000 £1,000 + 1%£250,000 n/a 1%£500,000 n/a 3%
Top rate (£500,000 +) n/a 4%Notes(1) First time buyers exempt from SDLT up to £250,000(2) For disadvantaged areas lowest threshold is £150,000(3) SDLT also payable on some new leases, dependent upon rents
Stamp Duty Thresholds
0%
1%
2%
3%
4%
5%
0 100,000 200,000 300,000 400,000 500,000 600,000 700,000
Stam
p du
ty ra
te (%
)
Value of property (£)
SDLT residential rate
SDLT non-resi rate
Developer Contributions • Nationalisation of Development Value• Betterment Levy• Development Land Tax• S106 agreements – need for transparency• Tariffs• Planning Gain Supplement • Community Infrastructure Levy –
• Planning Act 2008• CIL Regulations April 2010
• Charging Schedules• Scaled back s106 arrangements
Viability Assessment
• S106 contributions - subject to viability testing• Affordable Housing provision• Cross Rail Levy and hypothecation• Modelling to assess the planning gain tax
Conclusions
• Property taxation needs an overhaul• Equity and efficiency issues need to be addressed• Vested interests are likely to resist change and seek
new exemptions and reliefs• Do we need to try other approaches?