SIPPS shock as Brown shelves tax loophole for residential property.

I dont have any sympathy even though it looks like they were conned by Brown. And as SIPPS were one of the few things propping up the house market I expect to see accelerating price falls over the next year.....
Sipps shock as tax break is shelved
The Telegraph
By Ian Cowie, Personal Finance Editor (Filed: 06/12/2005)
Savers who have put more than £5 billion into a new type of pension, which the Chancellor promised would be able to buy residential property, will be hit by a "shocking" climbdown announced yesterday.
Two years ago Mr Brown said that self-invested personal pensions (Sipps) would be able to gain tax relief on residential property bought after April 2006. Yesterday the Treasury said: "Sipps will be prohibited from obtaining tax advantages when investing in residential property and other assets, such as fine wines."
Such was the excitement about the promised tax breaks that, when Standard Life launched its first Sipp this year, savers poured £1 billion into the fund in 10 months.
Now the industry is looking at a multi-million bill for costs incurred preparing for reforms which will not happen - and the risk of compensation claims.
Charles Suchett-Kaye, of advisers Reynolds Porter Chamberlain, said: "There may be angry investors who bought off-plan residential property in anticipation of tax breaks.
"They may look to blame financial advisers for their loss."
Andy Bell, of specialist administrators which run Sipps for Barclays Bank and Skandia Life, said: "It is deeply disappointing."
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Reply to
Crowley
The whole idea of allowing residential property within SIPPs seemed insanity from the outset. The proposed rules were just begging to bent and stretched to the limit.
I'm just surprised (well, actually not that surprised) that the Treasury / Revenue allowed things to get this far....
Reply to
sylvian stone

I think they were worried about the rules being outright broken, rather than stretched. There would have been no additional tax advantage in residential property SIPPs over any other kind of pension investment *provided* the rules about making use of the investment were kept - ie a BIK charge or a market rent paid if the property was used for personal use.
But I think many people were too thick to understand this or thought fraud would be undetectable, and thought they could get a holiday home tax free...
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Andy
Reply to
Andy Pandy

"Andy Pandy" wrote in message news:
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There could be a lot of very unhappy Estate Agents who thought SIPPs were going to keep the UK Property Bubble inflated.
I shall be happy that I don't have to keep repeating myself about (residential property) SIPPs not getting off the ground for 99% of the people.
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Doug Ramage 

[Watch Spam Trap]
Reply to
Doug Ramage
In message , Crowley writes
Another straw for you to clutch at in your drive to be able to say, "I predicted the crash"
The only person who people can truly blame for this, other than themselves, is Gordon Brown - that lying cheating bastard who has spent all of our money, borrowed to the hilt on his "credit cards", and who has finally had to declare that he is no better at finances than the average Joe who is now using the new bankruptcy laws to avoid his debts.
The thing I have trouble with is that you know exactly what you are going to get with the Labour party - busted - yet people continue to vote for them.
AFAIK, he has increased spending in the public sector by 100 billion per annum, and needs to borrow around 10 billion a year to fund this - why on earth didnt he make the increases 80 billion per annum, and have a surplus of 10 billion - it's not rocket science, or is it??
Given that he has another 3 years to screw things up even further, it will probably take another 5 year for the Conservatives to get us back on track - I just hope they are given the time.
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Richard Faulkner
Reply to
Richard Faulkner

LOL. I think the straw-clutchers are those still in denial about the increasingly dire state of the housing market and who unbelievably still maintain house prices only ever go up.LMAO
Well said.
Don't forget only 22% of the total electorate (34% of those who voted) returned this shower with a 66 seat majority. 78% of us don't want 'em. Hardly democratic is it ?
Exactly. Brown has turned healthy surpluses in trade and public spending into huge deficits putting Britain deeply into the red and risking a major run on the pound. He practices Enron economics and when people finally see through the spin, lies, manipulation of figures, and all the smoke and mirrors his reign as Chancellor will go down as one of the worst in recent memory.
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Reply to
Crowley

LOL. I think the straw-clutchers are those still in denial about the increasingly dire state of the housing market and who unbelievably still maintain house prices only ever go up.LMAO
Well said.
Don't forget only 22% of the total electorate (34% of those who voted) returned this shower with a 66 seat majority. 78% of us don't want 'em. Hardly democratic is it ?
Exactly. Brown has turned healthy surpluses in trade and public spending into huge deficits putting Britain deeply into the red and risking a major run on the pound. He practices 'Enron' economics and when people finally see through the spin, lies, manipulation of figures, and all the smoke and mirrors his reign as Chancellor will go down as one of the worst in recent memory.
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Reply to
Crowley

Pretty good so far...
The poor gullible fools...
He's an old tax'n'spend socialist, even as the rest of the world is discovering that capitalism works. He just can't help himself.
Oh dear. You had to blow it didn't you. Believing in the Tories is no different to believing in Labour.
FoFP
--
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew 
And the hearts of the meanest were humbled and began to believe it was true 
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Reply to
M Holmes

"Crowley" wrote in message news:
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I dont have any sympathy even though it looks like they were conned by Brown. And as SIPPS were one of the few things propping up the house market I expect to see accelerating price falls over the next year.....
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wasnt it you who posted a long analysis recently about how SIPPs *werent* going to be propping up house prices?
--
Tumbleweed 

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Reply to
Tumbleweed

Fair comment. I expected that and maybe I did underestimate the likely impact of SIPPS on 'sentiment'.
The amount to be pumped into property through SIPPS was estimated at around £10billion pa which is a small fraction of the total amount involved in house sales. However the impact of SIPPS on buyer/seller sentiment seems to have been significant in retaining *some* confidence in the market with frequent talk of a 'wall of money' about to hit the property market next April.
Brown has put the kybosh on that now amid much weeping and wailing from ea's, IFA's etc and it seems likely to me that this will have a negative effect on sentiment aswell as depriving the housing market of an injection of several billion pounds pa........
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"A £3bn property tax giveaway that has sparked frenzied investment in buy-to-let and holiday homes was yesterday halted in its tracks after an 11th-hour ban by the chancellor. The controversial tax break, which would, from April next year, have allowed the well-off to put their properties into a Self-Invested Personal Pension (Sipp) effectively tax-free, was yesterday closed after the government said it was being abused by the tax-avoidance industry.
The U-turn stunned financial advisers and property developers. The Royal Institution of Chartered Surveyors had estimated that 50,000 properties, worth around £24bn, would be switched into Sipps over the next few years. At the last Property Investor Show in London scores of exhibitors were promoting buy-to-let Sipp schemes promising "40% off" the cost of property, while Abbey, which owns the UK's largest Sipp provider, called it "the hottest topic of conversation at middle-class dinner parties".
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"Financial advisers and Sipp providers have reported that growing numbers of investors have set up Sipps or paid deposits on flats in property developments with the aim of completing the transaction after the rule changes in April.
Richard Meek, principal of Punter Southall, financial advisers, said: "To leave it this late before introducing legislation - after explaining on a number of occasions how it was going to work - is extraordinary. Most people were led to think this was definitely going to happen. Many people will have started to make financial plans and will have incurred costs setting up a Sipp for no reason."
--------------------------------------------------------------------------- -------------------------------- POSSIBLE FIRST SIGNS OF LIKELY CONSEQUENCE OF BROWNS DECISION TO EXCLUDE RES. PROPERTY FROM SIPPS ?................credit crunch on the way ????.................
"The Mortgage Works has announced it will cease to accept applications for buy-to-let (BTL) mortgages on newly-built properties.
The lender will only accept buy-to-let applications on properties aged over one year from now on.
All current applications in the pipeline will be honoured. The change only affects new buy-to-let mortgage applications.
Commenting on the decision, Matthew Wyles, group development director, said: "Owing to the current over-supply of newly built property, valuation in this sector is more of an art than a science. Some developers are now prepared to do deals on price outside of the formal contract. In these cases the lender may be unaware of the actual price being paid and ends up relying on a valuation which may in turn be based on erroneous assumptions. We will go back into new build buy-to-let when we believe that the market forces of supply and demand have reached equilibrium."
This announcement relates exclusively to buy-to-let."
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Reply to
Crowley
In message , Crowley writes
If my maths are correct, 35% of the electorate didnt vote, but they did have the choice and, if they didnt want labour, all they had to do was turn out and vote as appropriate. I therefore dont think that you can conclude that they didnt want Labour, merely that they were:
1) ambivalent
2) lazy
3) undecided, (I think this differs from 1??)
4) anything I havent thought of.....
Having said that.... 22% of the electorate returning a majority hardly seems right, so PR may be they way to go - but Turkeys dont vote for Xmas
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Richard Faulkner
Reply to
Richard Faulkner
In message , M Holmes
Yes.... I thought for a minute or so about the last part of the last paragraph, and decided life's too short, so let it go
Who would it be best to believe in??? If your theories are correct, we're all in the shit anyway, (except those rich in cash and gold??), so what to do?
--
Richard Faulkner
Reply to
Richard Faulkner
In message , Crowley writes
10% or so isnt insignificant... or is it?
It wasnt so long ago that some people were saying that the 10% of property money which is invested in buy to lets was significant enough to collapse the market.
When I was an agent, a variation of 10% in volumes of sales was insignificant i.e. if I sold 9 houses a month, rather than 10, or 108 a year rather than 120, had minimal effect on either me, or the local market, (obviously extrapolated to include all the local agents).
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Richard Faulkner
Reply to
Richard Faulkner
It was heavily flagged in the financial press - with many commentators warning of the problems and reporting that there was lots of lobbying going on to tighten the rules. Given that one of the golden rules of investing is never invest solely for the tax breaks I've got not sympathy for people who got caught out. Anyone genuinely interested in residential property can still invest in it via a REIT or indeed pay the 40% tax charge.
In fact, I'm slightly impressed they corrected the problem before the rules came into effect ...
Thom
Reply to
Thom

Is £10billion 10% of the annual housing market ?
I don't have the figures to hand but I'm sure its much less than 10% though if it is as high as that then it should have an even more significant impact on driving sentiment down.
Reply to
Crowley

That doesn't work very well for those of us who'd rather we ran our own lives than have politicians do it in a half-assed way for us. If we vote for the least worst of them, they only take it as legitimising their nonsense.
FoFP
--
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew 
And the hearts of the meanest were humbled and began to believe it was true 
 Click to see the full signature
Reply to
M Holmes

I'm a bit confused. Is 10% the total esimated BTL, or the estimated amount to be put into SIPPS?
Reply to
shano

Personally I root for no government at all, but I'd be prepared to compromise if politicians were there strictly to run national defence on no more than 5% of GDP and were banned outright from interfering in the economy in any way whatsoever.
I'm not predicting apocalypse followed by survivalism (though in the nuclear age it can never be entirely ruled out) just some rough financial problems ahead for the world. After a couple of decades we'll probably come through OK.
Finally it's starting to look not entirely insane to tell people to buy gold.
Fortunately the advice to reduce debt as much as humanly possible and save as much cash as possible by cutting down on as much as possible is very sound advice irrespective of whether I'm right and can be done to some degree by everyone.
If I am right then the key to survival will be having as little debt as possible and holding on to income while cutting expenses, while the key to prospering will be to have free cash available for when assets are being sold at distress prices.
Timing Note: My expectation that Fannie and Freddie would be Ground Zero of the coming crisis is beginning to bear fruit. Between them they now have between 15 and 19 billion Dollars of miscounted money, and counting. Given that this resulted in 40 million of bonuses for the top guy, he may well be going to jail. Meanwhile Fannie says that it will take 8 million man hours of their own accountants to try to get accurate numbers for three years ago. That doesn't count investigation time by the SEC and other interested parties. I daresay there's more fun to come there but it's safe to conclude that the main conduits of credit recycling are being welded shut (they've even been ordered to sell mortgage-back assets they were holding on their own books because (and I'm quoting Sir Printsalot here, not my own ravings on the subject) they pose a threat to the global financial system.
In short: we've pretty much hit all my targets for the pre-game warmup. The game, my dear Watsons, is now very much afoot...
FoFP
Reply to
M Holmes
M Holmes writes:
That is why I think that every ballot paper should have "None of the Above" as the last candidate, either that or ballot paper "spoiled" by being placed unmarked (except for the official stamp) into the ballot box being counted as a 'vote of no confidence in any of the candidates". Or change the system so that you put a tick against at most one candidate for whom you wish to positively vote and crosses against as many other candidates whom you positively do not want to be elected (eg a labour supporter might tick the labour candidate, put a cross against the conservative and leave the lb-dem blank). The add the ticks for each candidate and subtract the crosses and require that the winning candidate have a positive score otherwise the election otherwise it has to be re-run with different candidates, and if this happens in a majority of constituencies require that all of the parties rework their policies/manifestos.
Reply to
Graham Murray

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