So What's Your DEMON?

19th October 2006

T. Wyn Jones

All hallows eve will soon be upon us. A date when our Celtic ancestors marked the end of summer and the beginning of winter and when it was believed that evil spirits came with the long hours of darkness so bonfires were lit to ward them away.

So in this present day and age what are our demons and how do we best seek refuge? In property terms many see the Inland Revenue or “tax man” as the “bogey man” with people running scared from the mere mention of the word.

Soon to pass will be a further addition to the Tax Man’s arsenal, namely the “Planning Gain and Supplement Tax”. This legislation allows the Inland Revenue to claim a further 20% of an individual’s profit if he/she sells their land for development. What this means in effect is that the private individual will have to give up 60% of the profit earned by selling his land for development - 40% Capital Gains Tax and 20% Planning Gain Tax.

“So what” I hear many of you say, why should private individuals benefit from owning land that happens to be located in an area that qualifies for planning? Whilst I can empathise with this view if we look at the big picture this could spell further problems in the housing market.

With the ever increasing restrictive planning policy’s regarding housing development, coupled with the continuing increase in tax liability what we will see is a further decline in the amount of land coming available for housing, which by the simple economic rule of supply and demand will lead to an increase in property prices – the direct opposite to what the government say that they are striving to achieve.

One other piece of legislation, which appears to have far reaching consequences, is the “Empty Dwelling Management Order”. This piece of legislation allows local authorities to confiscate properties, which have been empty for six months or more, refurbish them (without the owners consent) and then let them out as social housing. Once granted an “Empty Dwelling Management Order” can last up to seven years!

So imagine the house owner who has decided to see the world after many years of hard graft. On their return from their 12-month excursion they find their property occupied by tenants with nothing that they can do. Now of course your Local Authority will say that they will not aggressively implement the act and will only carry out such as a last resort. But they could if they wanted to!