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andreweibi2013

Buy a home and get money back from the government

The Prime Minister was unequivocal. This summer his Government will introduce a new incentive scheme to encourage home movers to invest in energy saving measures.

At his most recent monthly cross-examination by House of Commons Committee chairs, he quite specifically described it as a “stamp duty discount for people who take action to improve the energy performance and energy efficiency of their homes” (Q49).

I only wish that this description had been accurate. Sadly it is not. Because formally the new scheme is not directly related to the stamp duty transaction. And, due to that, it can be argued there is no requirement whatsoever for the key professional groups involved in the buying and selling of homes – specifically, solicitors and licensed conveyancers, and estate agents – to inform anybody about the new scheme.

Essentially, it is simply a continuation of an existing scheme, around since January 2013, offering “cashbacks” to those who install energy-saving items in their homes. The big difference is that the new scheme excludes anybody who is staying put in their current home.

The “cashbacks” involved relate not to the amount of stamp duty paid. Indeed, it is even available to those who purchase property worth less than £125,000, who currently pay no stamp duty at all.

 Cashback scheme

Instead, the amount returned to the householder is entirely dependent upon the costs of the measures put in. Under the existing “cashback” scheme, if you wish to insulate a loft that has been converted into a room, you can claim up to £1,000 from the Government. If you insulate your solid walls, you can obtain up to £4,000. Extra double-glazing can get you £650 back.

That means that in a home costing, say, £225,000, and therefore incurring stamp duty of £2,500, installing just these three measures will ensure that the householder is considerably in pocket under the PM’s so-called “stamp duty discount.” Although, of course, the money remains to be found to make the initial capital investments, which will not be able to come via the Energy Company Obligation (although they should be eligible under a Green Deal Finance package).

The restriction to home buyers aside, delivery of the new “stamp duty discount” will be an improvement upon the 2013 “cashback” arrangements. Under that scheme, all measures must be subject to a Green Deal assessment, and can only be installed by a Green Deal provider. Such a closed-shop arrangement may in large part explain why, two-thirds of the way through the existing scheme, less than 3 per cent of the original £125m set aside had been applied for.

In contrast, the new “stamp duty discount” appellation has certain very definite advantages. Ever since 2006, whenever a home is placed upon the market, an energy performance certificate (EPC) must be provided for prospective purchasers. By law, the current rating, from A to G, must be included in all estate agent promotional material. And importantly the vendor must provide the full recommendations regarding cost-effective improvements that could yet be made. This obviates the need for any extra Green Deal survey to be undertaken.

To an extent, this is as far as any estate agent need go: after all, they act for, and are paid by, the vendor and only the vendor. If anybody is going to be prompted to action by this “stamp duty discount”, it is the purchaser – who will have professional conveyancers acting on their behalf. Even before exchanges of contract take place, these professionals will have given their clients all the details of the EPC. But the purchasers will get these at the same time as lots of other information about the property under consideration.

Never highlighted

The point is that the EPC information itself will never normally be highlighted as part of the process. Instead, just filed away as part of the inevitable legal bumpf.

What everyone remembers though is the invoice for the stamp duty due. Purchasers receive that bill from the solicitor wrapped up as part of their legal costs, bumping up its size. This effectively makes the conveyance a tax-collector for government. A role that from St Matthew onwards, nobody terribly enjoys playing.

This is where telling their clients about the very existence of the “stamp duty rebate” could benefit everyone, including themselves. Instead of being a bearer of gloomy news (“pay this invoice, mostly to the Government”), they could now add a sweetener (“but here is a way to get some money back, from the Government”).

Solicitors could make reference to the scheme in the covering letter, giving a website address, maybe even including an official Government leaflet about the “discount”. It can be argued that, in informing them about the scheme, they are fulfilling their duty to advise clients about matters of potential benefit.

A joint budget of £180m a year has been set for this and another scheme to assist private landlords. Assuming that the householder is not denied the right to employ the registered tradesmen of their choice to undertake the energy performance improvements, I can foresee this “stamp duty discount” being fully subscribed.

 

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Comments (1)

  • Avatar

    Steve Lewis

    |

    Andrew
    Intriguing article as I am buying a new house!
    But, as no mention has been made from my solicitor, where does one go for the information?
    Thanks
    Steve

    Reply

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