‘Land for the Many’
In these troubled political times, and with no party able to claim a consistent lead in the polls, many see an early general election as increasingly possible.
In the light of the political uncertainty, it is timely to examine the paper ‘Land for the Many’, edited by the environmental campaigner, George Monbiot, which contains a medley of recommendations that the Labour Party will consider as part of its policy development in the run up to the next election. Most are of interest; many will find them challenging. All landowners need to consider, sooner rather than later, whether they should be factoring them into their strategic and tax planning.
The main thrust of the report concerns itself with the increasing prices of residential and other property. ‘Buy to let’ is fingered as the villain of the piece, but foreign buyers and ‘speculative developers’ come in for their share of criticism.
Specific proposals include caps on rent increases, replacement of council tax with a progressive tax of residential property payable by landowners, abolition of stamp duty land tax for primary residences (except for those whose owners are not domiciled in the UK (non doms)), and supplemental taxes at a higher rate on second homes, empty homes, and those owned by non doms.
It is also proposed that capital gains tax (CGT) on sale of second homes and investment properties should be increased to place it in line with income tax rates. Introducing CGT on sales of principal residences is not recommended as ‘controversial’.
The express aim of these measures is to reduce the value of residential property. ‘Land for the Many’ recognises that these measures could prompt a rapid exodus of investors and therefore floats the idea of a ‘Common Ground Trust’ as one possible way of mitigating against such a housing market crash.
The idea is that ownership of the land could be separated from ownership of the bricks and mortar; the trust could acquire the land beneath the house and lease it to the householder. Individuals acquiring the bricks and mortar would ask the trust to purchase the land. A worked example indicates that a house currently worth £300,000 could be acquired by a family whose income would only allow borrowing of £150,000. This is an imaginative idea that could help the less well-off buy homes.
Long term reform of inheritance tax is proposed, replacing it with a lifetime gift system, allowing an individual to receive £125,000 tax free during their lifetime. Further gifts or inheritance would be taxed at the recipient’s marginal income tax rate. Reliefs for agricultural land and business assets would remain, provided they are not sold or rented after inheritance.
The abolition of rebasing of assets on death is also proposed. This is already Liberal Democrat policy, and restriction has been suggested by the Office of Tax Simplification; it therefore seems to be firmly on the political agenda.
Whatever the political future, any government can be expected to seek new and greater sources of revenue. There is therefore much to be said for landowners reviewing their affairs to take advantage of opportunities to reduce tax bills while they are still available.