Member Article

Construction starts encouraging but funding still fickle

Despite the construction seen across Manchester’s Skyline, funding for property remains critically tight, says Michael Jayson of national audit, tax and advisory firm Crowe Clark Whitehill.

Mr Jayson, Managing Partner of Crowe’s Manchester office, was commenting on the publication of the firm’s 2016 Property & Construction Outlook Report.

He said: “Looking across Manchester now, the crane count is encouraging. Funding for larger developments is still relatively tight and there is no sign that the banks are easing their lending criteria just yet.

“Instead, what we are seeing is a growing number of small to medium-sized developments funded in different ways. By commercial property funds, private investment or High Net Worth Individuals, all seeking better rates of return than are available from banks.”

“There is little evidence that the Brexit vote is hampering confidence in the UK economy, but this will only become apparent in the longer term.

“The biggest hindrance to innovation and enterprise in the property development sector is clearly an unhelpful tax environment,” he said.

Crowe’s survey reveals that over 70% of UK-based property and construction businesses view the tax system as unfavourable to the industry.

Some 68% of participants believe that Stamp Duty Land Tax (SDLT) is the biggest tax barrier to business growth, with another 12% perceiving Capital Gains Tax as the biggest barrier.

However, the government’s own Office for Budget Responsibility (OBR) has noted that the Treasury lost out on SDLT because it the increase was announced in the Autumn Statement 2015 but not introduced until the new financial year.

The OBR has produced a paper reviewing six episodes of what it describes as forestalling in property tax.

It notes: “The most striking example is the recent 3% surcharge on additional properties where we estimate 60,000 transactions were brought forward generating a net tax loss of over £300 million.”

Michael Jayson commented: “We too were advising clients to stay ahead of the curve and not be caught out by the SDLT increase. Pre-announcing a policy provides a window of opportunity for tax planning and, of course, the sensible course is to minimise tax where possible and legally permitted, as in this example.”

Turning to the government’s ongoing call for more housing to be built, he added: “We continually hear, year after year, that there is an ongoing housing crisis, and yet we wilfully put obstructions in the way of allowing the market to respond to demand, perceived or otherwise.

“Developers will build when they believe they can sell their product, but they also want a return on their investment that enables them not only to take profit but also to fund future profitable developments.

“We need, in the UK, to find more ways to encourage developers, large and small, rather than to place yet more obstacles and disincentives in their way,” he said.

Crowe’s view is that it is the government’s responsibility, if these expectations are to be fulfilled, to ensure stability and to create an industry environment favourable for healthy competition, international operation and opportunity for development.

“We are calling on the government for cuts to SDLT and improvements to stimulate supply and transaction.

“We are also calling for initiatives both to promote planning efficiency and regulate the market. We need to ensure the long-term international competitiveness of our market, and to ensure that uncertainty does not reduce investment into real estate,” said Mr Jayson.

He said an overhaul of the property tax system should be high on the government’s agenda.

“A reduction in the tax burden will fuel growth and encourage investment. Cuts to SDLT should be the first step towards this, as we are already seeing the negative impacts of the recent raises on the property market.

“Simplification to the planning process to promote efficiency and initiatives to regulate the market are also required. Ensuring that brownfield sites are available for development is crucial, and there is clear demand for this within the industry,” he said.

Ends (653 words)

Contacts:

Lynda Blackshaw, National Marketing and Communications Director, Crowe Clark Whitehill LLP. Tel: 020 7842 7117

Prepared and issued by Andy Skinner of ASAP – 01789 490786 or 07990 978257

Notes to Editors:

Crowe Clark Whitehill is an audit, tax and advisory firm and the UK member of Crowe Horwath International, one of the largest global professional service organisations with 200 independent member firms operating from over offices around the world.

The firm has 8 offices in the UK, with more than 70 partners and over 500 members of staff. This year the firm was named: Top Charity Auditor of the Year (Charity Financial Audit League Table 2016) and Best Tax Investigations Team (Taxation Awards 2016). The firm was also listed as Top 25 Accountancy Firms and Top 25 most admired companies by eprivateclient.

For more information visit : www.croweclarkwhitehill.co.uk

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This was posted in Bdaily's Members' News section by Andy Skinner .