Private Investors Could Cash In On Commercial Duty Shift

The controversial changes to stamp duty on commercial property announced in last week’s Budget will actually benefit most private investors, according to Acuitus chairman Richard Auterac.

Under the new rules, buyers will pay 0% in stamp duty for the portion of the transaction value up to £150,000; 2% between £150,001 and £250,000; and 5% above £250,000. Previously, 1% of stamp duty was paid on properties sold for £150,000 (as long as they produced a rent of more than £1,000 a year, with a zero charge if not); 1% on properties sold between £150,000 and £250,000; 3% on properties sold between £250,000 and £500,000; and 4% on properties sold for more than £500,000.

The wider commercial property market has responded negatively to the new rules, with British Property Federation chief executive Melanie Leech describing it as “an out-of-the-blue raid on commercial property transactions” – but Auterac said the tiered nature of the new system meant high-net-worth private investors buying properties worth up to £1.05m – a group prevalent in the auction room – would now pay less.

“It’s not going to harm the private investor,” he said. “This nascent sector is going to be encouraged by the changes to stamp duty.”

Auterac said an investor buying a commercial property for £270,000 before the Budget would have paid more than £8,000 in stamp duty, but today that figure would be £3,000. Lots at Acuitus auctions are sold for an average of £900,000 to £1m.

Coupled with the increase in stamp duty on second homes to 3% from April, Auterac said the new commercial stamp duty regime was “one more reason why, rather than automatically going to buy-to-let, private investors might look at commercial real estate”.

However, he added that the effect on commercial transaction activity above the £1.05m level would not be significant in the long term. “When the dust settles, the market will absorb the extra tax. It always does,” he said.

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