Bridging will be hit by tax clampdown


By Sarah Davidson Experts


have warned the


bridging sector may be dis- proportionately hit by gov- ernment clampdowns on tax avoidance announced in March’s Budget. Jonathan Samuels, chief


executive of Dragonfly Property Finance, said clos- ing


stamp duty loopholes


was fair enough but the 15% rate on homes over £2m bought through a company could cause “extensive col- lateral damage” in the short- term sector. He said: “Many genuine


investors and developers invest in the UK property market via corporate


ties. Taxing them at 15% is going to send them running which will hit the UK prop- erty market hard.”


enti-


The government an- nounced clampdowns that included


stamp duty on UK residen- tial


property worth more


than £2m when it’s bought by a company; the applica- tion of capital gains tax on residential properties bought by offshore envelopes and a 7% rate of stamp duty on property worth more than £2m.


OFFSHORE Many bridging deals are arranged


through offshore


trusts and companies to mi- nimise tax paid by investors but Lucy Hodge, director of Vantage Finance, disagreed with Samuels. She said: “For many wealthy individuals the use of one of these schemes would not be the be all and end all but rather a means to


charging 15%


make a deal more profitable so hopefully the fall out will not be too great, although no doubt there will be some disgruntled investors today.” Steven McColl, partner at Soho Corporate, agreed and said: “Prime property deals in central London are rarely about short term gain and are about long term prime real estate investment strate- gy. There is limited supply of prime stock and it is thought that


billions of pounds sit


on the sidelines waiting to buy prime target UK real estate asset. So whilst these developments will have some impact, the overseas trust and special purpose vehicle purchasers are about long term rather than short term gain. In short, the prime £2m+ market is not about to die.”


Bridging and development sector boost By Nia Williams


The bridging and devel- opment sectors more than doubled in size last year with members of the National Association of Commercial Finance Brokers arranging £2.84bn in bridging and development finance loans during the 2010/11 tax year. The amount arranged in the previous tax


year


£1.36bn. The


growth trajectory


seen at the NACFB was re- flected in lending volumes at Dragonfly Property Finance which have also risen sharply over the past two to three


www.mortgageintroducer.com totalled


years. Compared to 2010, the number of completions at Dragonfly during 2011 was 48% higher by number of loans and 58% higher by value of loans. The first two months of 2012 have seen this trend continue with more investors either taking out finance for the first time or expanding their


to the first two months of 2011, completions were up 41% by number of loans and 40% by value of loans. Jonathan Samuels, CEO


of Dragonfly Property Fi- nance, said: “These fig-


ures reflect how bridging and development finance has bucked the


trend,


showing growth at a time when other markets have stagnated reverse.


or gone into Adam Tyler, chief execu- portfolios. Compared


tive, NACFB, added: “The bridging and development fi- nance sector has come on in leaps and bounds in the past two to three years and there’s no doubt that specialist lend- ers have seized the day. New entrants


have introduced


both rate competition and innovation, which has made for a virtuous circle.”


News in Brief


• Connaught Asset Management suspended its Income Fund Series 2 and commissioned an independent review into the future of this fund and Income Fund Series 1 after the Financial Services Authority issued a fresh warning to investors following its failure to pay the scheduled quarterly interest payment on 13th April 2012.


• Montello Bridging Finance has received extra funding from its financial backers and increased investment into its Montello Income Fund. • Seven networks and mortgage clubs including PMS, Sesame and SimplyBiz Mortgages have chosen Precise Mortgages as their preferred bridging lender. • Bridgebank Capital launched a new product suitable for residential investment property loans.


• The Association of Bridging Professionals has launched an exclusive deal for members. • Montello Bridging Finance has become a patron of the National Association of Commercial Finance Brokers.


• Rob Jupp, managing director of Brightstar Financial, has been appointed to the executive committee of the Association of Bridging Professionals.


BRIDGING INTRODUCER MAY 2012 5


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