5 Government Subsidies for Property Investments

In a move to encourage urban regeneration, and redevelopment of brown field sites, the government have introduced a number of measures to encourage money to be invested in town centre buildings. These measures are a combination of local authority grants and tax incentives:

Above-Shop Flat Conversion Grants

Certain Local Authorities have introduced a package of grants to encourage residential accommodation within town centres. This is targetted by offering capital grants towards the cost of converting over-shop premises into flats. A typical example of this grant would be a contribution rate of 50% of capital expenditure on such costs, up to a maximum grant of £15,000.There is usually a tie-in clause with this type of finance, which would make the grant repayable if the property were sold within a certain time scale.

100% Capital Allowances

Similarly, immediate income tax relief will now be given on the cost to property owners of converting redundant space over shops into flats for letting. This compares with the previous treatment, where this cost would predominantly be classified as capital, only attracting capital gains tax relief upon disposal.

5% Reduced Rate of VAT for Residential Conversions

Unless a property is subject to an option to tax, for VAT purposes, which is unlikely, the VAT element of residential conversion costs is irrecoverable. The reduction in VAT to 5% for certain types of expenditure, is therefore a true saving for the property owner. This reduction applies to the direct sub-contract labour and supply-and-fix material costs of conversion, but not to services.

Zero Stamp Duty Land Tax

In a futher measure to stimulate the desired urban renaissance, the government have abolished stamp duty land tax for all property transactions in Britain's most disadvantaged communities. This compares to the previous regime where 1% stamp duty land tax commenced on such transactions over £60,000 in value, rising to 4% on transactions over £500,000 in value.

Full Business Asset Taper Relief for Business Tenants

The government have allowed property which is let to a business tenant to be entitled to the more generous business asset capital gains tax regime. As such, the full business asset taper relief of 75% is achieved after 2 years of ownership, which compares to the maximum less generous non business asset taper relief of 40%, which would be achieved if the property were let to a non business tenant for at least 10 years.