The rural agency team at Bidwells says it is concerned the Conservative government may - by accident or design - be reducing the supply of country homes in the rental sector.
It says that for many generations, farmers and landowners have provided a significant proportion of the rented housing stock in rural areas; however, the agency says recent tax changes suggest the Tories have not recognised this, or are attempting to reduce supply.
“While we acknowledge and support the Chancellor's desire to make houses available for young families who wish to buy, for many on low wages, in the rural economy, this will never be an option” the agency warns.
Bidwells sets out its concerns in four areas:
ATED: The Annual Tax on Enveloped Dwellings is largely designed to hit foreign investors in London but from April 12 2016 it becomes an annual tax on houses worth over £500,000 and owned within a limited company or other more complex ownership structure and not commercially let or used within a trade.
“A large proportion of farming businesses, within the UK, run their businesses as limited companies and it does not take much for a traditional estate cottage in a Home Counties 'commuter village' to be in excess of £500,000. Farmers will almost certainly change their behaviour because of this new tax and we strongly suspect that it will lead to a reduction in those employees who are offered a house within their place of work” says Bidwells.
Residential Mortgage Interest Relief: Private landlords of rental properties have historically been able to deduct the interest they pay on any mortgage and offset this at their own marginal tax rate. Over the next few years this valuable relief will be restricted to the basic rate of tax only, and the Chancellor has described this as targetting buy to let investors.
“Entrepreneurial farmers and landowners have taken advantage of historically low interest rates to borrow money and construct more rented houses on farms and estates. Because of the relatively low rental yields this strategy has only worked because the whole of the interest on the mortgage can be offset against the rental income. Restricting this to the basic rate of tax only will almost certainly make this unviable” warns the agency.
Stamp Duty: The three per cent surcharge being introduced from next April is again aimed at buy to let investors as well as holiday home buyers.
“The knock on effect is that far fewer farmers and landowners will be willing to purchase additional houses close-by for occupation by those working within the countryside; the costs will simply be too great to make economic sense. In addition, the increased cost of acquiring properties and the costs of certain transfers within farming families may mean that famers are actually more likely to sell off their cottages rather than transfer them to another family member and face an increased SDLT charge” says Bidwells.
Capital Gains Tax: From April 2019 the Taxpayer will need to pay an estimate of the CGT payable on the sale of a residential property within 30 days after completion rather than the normal date of January following the year of sale.
“If a farmer is forced to sell, then tax payment dates are accelerated” claims Bidwells. “If these measures encourage farmers to sell-off properties there is every chance that they could still be bought as second homes because that type of buyer will either be sufficiently well funded to pay the extra tax or they will adjust the price downwards.”