Flat Conversion Relief
There is a new government initiative that
looks to give tax rebates on investments on the
transformation of unused space above shops into
flats, particularly in urban areas of the UK.
Affordable rented property in our towns and
cities is becoming particularly hard to come by
hence the Government devising incentives to increase
the amount of affordable housing in our country’s
densely populated areas. It has been estimated that
England needs to build an extra 23,000 affordable
homes a year and this little-known government
initiative aims to bring about the changes required
to allow young working professionals the opportunity
to live in accommodation at an affordable price in
some of the most sought after areas of the UK.
However, in order to qualify for the available tax
breaks that make this investment such an appealing
option the property being converted must have been
built before 1980 and have no more than four storeys
above the ground floor. Furthermore, the ground
floor must be used for business and the upper floors
must have been unoccupied or used for storage in the
year before conversion work begins. It is this space
above the shop floor which is not being efficiently
utilised which is renovated to create flats and the
full cost of conversion is allowable for tax relief
of up to 40% providing the property is held for
seven years from completion through letting the
property out to young professionals or other first
time buyers looking to break onto the property
ladder that do not have the resources to purchase
their own home.
This option will be perceived by many as an
opportunity available to only to the super rich, yet
investors can benefit from the project with capital
of just £25,000 without the hassle of managing and
developing the properties themselves. Despite the
appealing tax breaks some investors are reluctant to
rush in because the money invested is tied up for a
lengthy period of time. Nevertheless, despite
investors having to wait approximately 10 years
before the converted property is eventually sold due
to it taking up to three years for the conversion
throughout this time the value of the property is
accumulating a significant amount of profit as house
prices continue to rise at approximately 5% per
annum. The money generated from the eventual sale of
the property will then be shared amongst those who
initially invested money into the regeneration of
the building earning the financier of the project a
significant return on their initial investment.
Simple Worked Example
INITIAL INVESTMENT £25,000
Tax Relief @ 40%* £10,000
Borrowing (Loan taken out by investment
property company, not the investor) + £30,000
Total property assets = £55,000
Assumed growth for period + £35,000
TOTAL VALUE = £90,000
Less loan - £30,000
Capital to investor = £60,000
Plus tax relief re-paid initially to investor +
£10,000*
TOTAL CAPITAL TO INVESTOR = £70,000
(Assuming 5% p.a. growth in the property value over
10 years and tax relief* is received in the first
three years, then the £25,000 investment could
generate a return of over 12% p.a.)
NB...The above worked example is for illustrative
purposes only, and is not a forecast or a guide to
expected returns. It is provided in order to show
the mechanics of how the investment operates and is
in a simplified form.
This example reveals the substantial return an
investor can expect to receive from investing the
minimum capital of £25,000 is approximately £70,000
which is a significant return on the initial
investment.
This investment is suitable for anyone looking for a
substantial return on their money invested and is an
appealing option to anybody with a reasonable amount
of capital available them.
For more information please
contact us by whatever
means are convenient and we will be only too pleased
to present this superb opportunity to you. |
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