Steve Plaskitt, a partner at MHA, an accountancy firm, said the chancellor’s spring budget has stoked the fires of the construction industry with policies that will keep house prices higher. He said: The spring budget was a boon for both house buyers, who stand to benefit from the extension and phased ending of the stamp duty holiday, and house builders, who will hope that the government’s guaranteed support for 95% mortgages until the end of 2022 will drive demand. The government’s infrastructure spending, such as the £27bn earmarked for roadbuilding, is also impressive and will create much needed stimulus for the industry. Collectively these measures will underpin performance in the sector for the months ahead. Plaskitt does question whether the pandemic will change longer-term conditions for the industry, including Britons’ apparent affection for high-rise city living and jobs in expensive city-centre office blocks.
Our Corporate Finance team and Legal experts from Muckle LLP have helped Northumbrian Roads to join forces with one of the UK leaders in road building.
The North East road maintenance contractor was sold to part of a global construction group as part of its strategy to build its presence in the infrastructure sector.
Prudhoe’s Northumbrian Roads Limited is a road surfacing and highway maintenance contractor with a strong presence in the North East market.
The acquisition is part of the buyers’ strategy and will allow the company to strengthen its position as it seeks to gain market share in the major infrastructure schemes it believes will be needed as part of the economic recovery following the Covid-19 pandemic.
Northumbrian Roads, which has depots at the Port of Tyne and the Port of Sunderland, was established in the late 1980s by the late John Lynch and his business partner George Barton.
Among the high profile contracts, it has been involved in was the re-surfacing of the Wearmouth Bridge in Sunderland last year.
Our Corporate Finance team and commercial law firm Muckle LLP supported Northumbrian Roads in a deal that ensures the business will continue to grow under their new ownership.
Sean Lynch, Owner, from Northumbrian Roads said:
“Ever since the company was founded by my father John Lynch and business partner George Barton over 31 years ago, we have progressively grown the company, focusing on strong relations with our customers, teamwork and innovation, complemented by the highest quality materials and a first-class service.
The take-over process was made smooth and the legal and financial aspects were carried out in such a professional manner by both Muckle LLP and MHA Tait Walker that we had confidence that we were doing the right thing for the company to move forward.”
“It is great for the Lynch family to be able to sell their shares and to see the company their father founded many years ago become part of a larger group and to continue to serve the North East. I am sure the business has a very bright future.”
Muckle LLP’s corporate lawyers Matthew Walsh and Sara Worsick advised the sellers on the legal aspects of their sale, with commercial property advice from real estate lawyer Deborah Lazenby.
Matthew Walsh, corporate partner at Muckle LLP, added:
“We’ve advised Northumbrian Roads for many years and it is no surprise that the company has attracted the attention of a national leader in its field. It is a very well-run business and, with the added support the acquisition will bring, I’m sure it will continue to thrive within our region.”
This blog was written by Steven Whitehead, our Financial Planner and Secured Lending Specialist.
With current headlines of Covid-19 infection rates on the increase, a second lockdown, and increasing fear of job losses on the horizon, it all paints a gloomy picture.
So why is the sun shining on the housing market?
Changes to the housing market
At the start of November, the Nationwide Building Society reported that house prices rose at their fastest rate for 5 years in October. There would appear to be a number of factors that could be considered; the first being a surge in house sales after the first lockdown ended, which created the impression of a property boom, and a shortage of available properties resulted in house prices getting pushed higher and higher as estate agents set deadlines for offers to be made under a “sealed bid” scenario.
Or it could be as a result of the Government’s generous Stamp Duty Holiday, which sees the Stamp Duty threshold increased to £500,000 before it is paid on a main property purchase. This would result in a £15,000 saving on a purchase price of £500,000.
However, the mortgage market does not appear to share the same level of enthusiasm as the estate agents and the media as they proceed with a greater level of caution and scepticism at the rising house prices. With the extension of the furlough scheme until Spring 2021, there is still no clear indication of how many businesses will fail and how many jobs will be lost in the new year.
Back in September, the Centre for Economics and Business Research predicted that house prices will fall by around 14% in 2021 as the Stamp Duty holiday comes to an end and demand drops off. It would appear that it is this fear that is driving mortgage lenders to adopt a more cautious approach to their underwriting and lending policy. We have already seen the Banks and Building Societies removing competitive fixed rate mortgages from their product range with little or no notice and some lenders removing their full product range to re-introduce it with higher rates and the need to provide larger deposits by increasing the LTV (loan to value)
What options do you have?
You could sell your property and achieve a high price now and purchase your next property at a potentially inflated price. If you have no plans to move house in the medium to longer term, then a 14% drop in value in 2021 may not have a huge impact on your longer term plans.
You could sell your property and achieve a high price now and then move in with family or into a rented property and wait for a house price crash and “Bag a bargain”. You may well bag a bargain, but what if a crash never comes and we continue to see steady growth? Then you will then have to start to climb back onto the property ladder, with higher property prices and the re-introduction of Stamp Duty from 1st April 2021, so you could find yourself financially bruised.
Don’t rush into it
Buying a property is likely to be the largest purchase you will ever make, so there is no need to rush into it. If you were buying a car or upgrading your mobile phone, then you would start by researching the options available to ensure you were getting the best deal. When you are buying a property you need to do the same. Your head and heart will have different opinions so you need to stop, think and then proceed with caution.
Many Banks and Building Societies have tools on their websites that can help you calculate the maximum amount you can borrow or work out your monthly mortgage payments. As mentioned earlier, the mortgage market and lending policy can change overnight so it is always wise to speak to an independent mortgage adviser to ensure that you are getting the best advice.
Will the sun still be shining on the property market in 2021? Who knows.
As a mortgage is secured against your home it may be repossessed if you do not keep up the mortgage repayments.
Our blog from November 2019 discussed the new reporting requirements for residential properties disposed of from April 2020.
As the new rules are now in place, it is important to fully understand them and ensure you are declaring the correct information and tax to HMRC. There are many financial and legal considerations to make when disposing of property, but have you considered the tax implications and filing requirements?
We have listed below the main questions and answers regarding the new reporting requirements.
Who is affected?
Individuals (UK or non UK resident) and trustees now need to declare a disposal of UK residential property to HMRC and pay the appropriate Capital Gains Tax (CGT) within 30 days of the completion of sale.
A separate return needs to be submitted for each disposal, unless more than one property was disposed and completed on the same date.
What is a disposal?
The new rules apply to residential properties gifted or sold, so you don’t necessarily have to sell the property and receive proceeds to have a CGT liability. If in doubt, please speak to your tax advisor to check if you will need to report the disposal.
How do I report the disposal to HMRC?
All individuals need a tax account regardless of whether they will file the return themselves or ask their agent to file it on their behalf.
If you would like your agent to report the disposal on your behalf, you will have to request a ‘CGT on UK property reference number’ on your own tax account to provide to your agent and give permission for the return to be filed for you.
What if I am selling my main home?
Relief is available for individuals selling their main home and no CGT will likely be due as long as you lived in the property throughout the total ownership. If full relief applies and there is no capital gain made, you do not need to report the disposal to HMRC.
Partial relief is available if you lived in it for some of the time or if you let out the property whilst also living there. Please seek advice from your advisor if you need advice on selling a house you have not always used as your main home.
Please also note that a married couple or civil partnership can only have one ‘main home’ between them for CGT purposes.
How do I calculate the tax?
The amount of CGT you pay depends on a lot of factors:
- Your other taxable income
- Your other capital disposals in the year prior to the disposal you are reporting
- Capital losses you have brought forward from earlier years
- Reliefs available to you
- Annual exemption available to you
- Allowable costs incurred during sale
- Costs involved when you originally purchased the property
- Capital improvements made to the property
Calculating the CGT due can be complex and we would recommend asking your advisor to calculate this on your behalf. The gain will be taxed at a rate of 18% or 28%, or a blended rate between the two. Your taxable income in the year determines the CGT rate because, if you are a basic rate taxpayer, you will pay CGT at 18% and a higher rate taxpayer will pay CGT at 28%.
The CGT is often estimated as the disposal may be early in the tax year before you are aware of your taxable income for the tax year.
If the CGT was not correct, the difference will be calculated and paid when you file your self-assessment tax return. You can also amend the CGT return at any point once final figures are held, if estimated details were previously used.
It’s important to understand that a self-assessment tax return isn’t due to be filed until 31 January following the end of the tax year of the sale, so there can be a long delay in receiving a refund of tax overpaid or having to pay additional taxes if your calculation was incorrect.
Mr Walker sold a residential property on 1 July 2020. He declared a capital gain of £50,000 and paid CGT to HMRC in the same month. His self-assessment tax return for 2020/21 is not submitted until 31 January 2020, 18 months after the property sale. His actual CGT liability was higher than his original estimate and he will have to pay the additional tax to HMRC, at which point he may no longer have retained the sale proceeds or have cash available.
What if my property is overseas?
You are not required to report the disposal within 30 days if the property is not in the UK. If you currently file a UK self-assessment tax return, then the gain can be reported on your return as normal, otherwise you can report the disposal using the HMRC real time capital gains service.
Do I also need to file a self-assessment tax return?
If you usually submit a self-assessment tax return you will still be required to submit one. You must declare the disposal on your tax return, taking into account the CGT you have previously calculated and paid using the 30 day reporting service. If the originally calculated CGT was not correct, the difference will be calculated and paid when you submit your self-assessment tax return. Similarly, any overpayment will be refunded.
What if I miss the deadline?
A late filing penalty of £100 will apply if you do not report the disposal to HMRC within 30 days of completion. The penalty increases to 5% of the total tax due, or £300 if greater, if the return is more than 6 months late.
Late payment interest will apply if the tax is paid late.
How can we help?
Our Private Client tax team are experienced in dealing with CGT disposals and can assist you with reporting the disposal to HMRC, as well as calculating the CGT for you.
We have helped our clients understand the tax reliefs available to them, to ensure the CGT is calculated correctly including the appropriate relief, meaning they did not have cashflow issues by paying too much upfront and having to claim the refund back when they file their self-assessment tax return.
We understand the process of our clients setting up a tax account. Although it is not ideal to some who aren’t used to doing this, with our step-by-step instructions it is a pain free process. We then take the hassle out of their hands once the initial account set up is complete. Selling a house can be stressful, particularly if it is your current main home, and we can help take some of the admin burden from you by checking your CGT position and declaring the sale to HMRC on your behalf, if required.
Please do not hesitate to contact us at firstname.lastname@example.org if you require our assistance or have any queries.