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Buy-to-let Investors Hit By Duty Loophole

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Guest Riser

Apologies if this has already been posted but it is not a good week for BTL. First they are hit by the Revenue calculating stamp duty on total rather than individual property sales, then they have SIPPS blown out of the water leaving them wit around £5 billion tied up in expensive SIPPS schemes until they retire :lol:

Buy-to-let investors hit by duty loophole

BUY-TO-LET investors, are being hit with big bills after the Revenue and Customs began exploiting a completely unrelated measure included in last year's Finance Act to clamp down on stamp duty avoidance.

With confidence in pensions at a low, more people are relying on portfolios of property to provide for them in old age. Yet buy-to-let investors have seen their stamp duty bills soar after a change of tack by the Revenue over the tax.

Stamp duty is charged on all transactions, and it rises in bands along with the value of the purchase. Below £120,000 it is zero, then it is charged at 1% up to £250,000, 3% up to £500,000 and 4% above this threshold. Once a band is breached, the higher rate is charged on the entire value.

However, some investors have recently been shocked to discover that instead of paying stamp duty on each individual property, as they expected, the Revenue has begun totalling up the value of properties bought and applying the highest rate of tax to the aggregate sum.

Brown's SIPPS move surprises industry

Making Pensions Tax Simplification complicated at a stroke, the Treasury announced legislation would remove all tax advantages from holding prohibited assets with an unauthorised member payments charge designed to recoup relief attributable to the asset concerned.

The crackdown will hit all disqualified investment from midnight on Monday (5 December), with property acquired before then only exempt if unimproved or renovated under binding contracts executed before the deadline.

Brown's statement referred only to 'the misuse of SIPPS schemes to purchase second homes'. He made no mention of the extension of the ban to other 'tangible moveable assets' to prevent abuse through personal consumption.

SIPPS will still be allowed to invest in 'genuinely diverse commercial vehicles' such as a Real Estate Investment Trust that hold residential property or other prohibited assets.

What does this mean for BTL who have exchanged on off plan properties for SIPPS ?

Edited by Riser

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  • 301 Brexit, House prices and Summer 2020

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      • down 5% +
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