As we enter the final countdown to the Budget there’s been a surge in transactions as people look to ensure deals complete before the fiscal landscape changes.
Parties who are currently negotiating contracts should give some thought to how Budget changes to tax rates and reliefs may take effect. Getting a contract exchanged before the Budget may not be enough to spare an increase in applicable CGT rates unless exchange is unconditional. SDLT rate changes have in the past taken place on the day of the Budget.
There are different legislative mechanisms and parliamentary conventions that the Government has used over past Budgets to give effect to changes. The rules are complex but it is fair to summarise that what has happened historically is not always a reliable guarantee of how any future changes on 30 October may take effect.
One risk for contracting parties to be aware of, is that even where parties enter a real estate contract with a completion date stated to be before 30 October, under standard property sale/auction sale conditions there may be scope for that date to be delayed beyond the 30 October. Worse still, standard contract conditions for service of completion notices, claiming compensation or exercising termination rights may not apply until after the 30 October.
Any party negotiating a contract now that carries a Budget risk should be asking their advisors to review and consider possible modifications to standard form contract conditions.
Should you wish to discuss any of the issues raised in this article, please contact Richard Walford or Cathy Bryant.
