Full slide presentation from Property sector annual update, October 2018, Exeter Racecourse

1. Property Sector
Annual Update
October 2018

2. Chairman’s welcome
John Endacott – Partner
and Head of Tax

3. Programme
Stamp duty land tax – Ian Pring
VAT update – Julie Towers
Residential property update– Ian Pring
Capital allowances – Paul Collings
Structuring property businesses – John Endacott
Funding and finance – Rob Gear
Retail insolvencies – Nick Harris
The sector, the politics, the future – John Endacott

4. Housekeeping
Follow us on twitter:
@pkfFrancisClark
#PropertySeminar18

5. Stamp duty land tax
Ian Pring – Tax Director

6. www.website.com
Stamp duty land tax (‘SDLT’)
Due on a:
• Purchase/transfer
• Interest/right/power in/over land
When could this be relevant?
• Transfer property owned personally to a
company
• Purchasing property
• Leasing property

7. SDLT
Residential property Rate
Up to £125,000 0%
£125,001 to £250,000 2%
£250,001 to £925,000 5%
£925,001 to £1.5 million 10%
Above £1.5 million 12%
Non-residential property Rate
Up to £150,000 0%
£150,001 to £250,000 2%
Above £250,000 5%

8. Higher SDLT rate of 15%

9. Higher SDLT rate of 15%
Non-natural person (e.g. company) single dwelling
purchase chargeable consideration >£500k
• Easy to forget!
• Applies to residential or mixed use property
• Does not apply if bought for qualifying use:
• Property rental business
• Property developer/trader
• Property occupied by employees
Change of qualifying use within 3 year period
triggers withdrawal!

10. Residential or non-residential?

11. SDLT legislation:
• Residential property is any building that is used
or suitable for use as a dwelling, or which is in
the process of being constructed or adapted
for such use, along with the garden or grounds
and an interest in land subsisting for the benefit
of either the dwelling or its garden or grounds.
HMRC Guidance (SDLTM30030):
• ‘Garden or grounds’ includes land which is
needed for the reasonable enjoyment of the
dwelling, having regard to the size and nature of
the dwelling. This will usually be a question of
fact depending on the individual circumstances
of each case.
What is residential property?

12. Per HMRC meeting with representative bodies in June
2018:
• Land within ‘garden or grounds’ sold separately to
dwelling remains ‘residential property’ on acquisition by
purchaser – irrespective of whether plot within
garden/grounds being sold fenced/walled off from
dwelling.
• If subsequently sold on by purchaser, plot non-
residential for SDLT purposes unless a dwelling exists
(or in course of construction) at effective date of sale.
• Where a former dwelling is derelict or has been
demolished then it will follow that the garden/grounds
are no longer residential.
What is residential property?

13. Legislation: “Land which includes land that is not
residential property”
Per HMRC June 2018:
• A paddock that is not used for anything else remains
available for the enjoyment of the dwelling because
there is no other identifiable use.
• However, a formal arrangement involving the granting of
a lease or licence to graze the land is more likely to
prevent the owner’s enjoyment of that land.
• It will be necessary to weigh up all the factors in a
particular case to establish whether or not an
identifiable use precludes enjoyment by the
occupier(s) of the dwelling.
What is mixed use property?

14. Legislation: “Land which includes land that is not
residential property”
Recent cases:
• Manor House and 58 acres of land – marketed
as 2 plots – house & 25 acres + 33 acres
subject to 3rd party grazing licence.
• “Farm” farmhouse and 27 acres “mix of grazing
land, ancient woodland and farm pond”.
• House and 16 acres – 7.33 acres subject to 3rd
party grazing licence and covenant restricting
to agricultural use only.
What is mixed use property

15. Mixed use property
Mixed use claim
• Purchase of home by individual for £5m.
• Total non-residential SDLT paid was £239,500 on advice of
solicitor.
• SDLT amendment made to include a claim for MDR as well
as mixed use treatment.
£44,960 SDLT refunded
“Small country estate”
• 7 bedroom farm house
• 3 bedroom detached cottage
• 3 bedroom barn conversion
• 2 stone barns newly converted used for holiday lets
• Modern farm buildings
• Landscaped gardens, grounds and ponds
• Commercial high bird shoot
• 450 acres (182 hectares)

16. Multiple dwellings relief (‘MDR’)
• Transactions the main subject matter of which
includes interests in a least two dwellings.
• Dwelling means a building or part of a building
which is suitable for use as a single dwelling
or is in the process of being constructed or
adapted for such use.

17. Multiple dwellings relief
Referral from another firm of accountants
“A prominent and attractive Grade II listed village house
with an adjacent annexe and paddock” - purchased for
£1,350,000
Main House + Annexe = 2 dwellings
• Total amount of tax originally paid at the residential
surcharge rates (as individual owned another dwelling) was
£119,250.
• SDLT return amendment made to include
a claim for MDR.
• £31,250 SDLT refunded.

18. Reliefs – certain acquisitions of
residential property
Relief from SDLT available in
appropriate circumstances to:
• ‘House building company’ - means a
company that carries on the business of
constructing or adapting buildings or
parts of buildings for use as dwellings.
• ‘Property trader’ - means a company,
LLP or partnership (whose members
are all companies or LLPs) that carries
on the business of buying and selling
dwellings.

19. Reliefs – certain acquisitions of
residential property
Relief from SDLT available in appropriate
circumstances to:
• House building company or property traders -
purchase of dwelling from an individual where
the individual buys a new dwelling from the
house building company.
• Property trader - purchase of dwelling from
the estate of a deceased person.
• Property trader – purchase of dwelling where
a series of transactions breaks down.
• Employer or property trader – purchase of
dwelling from an employee who is
re-locating.

20. Reliefs – other
• Sub-sale relief/transfer of rights
• Sale and lease back
• Charities relief
• Group relief
• Acquisition relief
• Reconstruction relief
• etc…
Note - from 1 March 2019 SDLT
return/payment = 14 days.

21. Stamp Duty Land
Tax
Ian Pring – Tax Director

22. VAT Update
Julie Towers – VAT Partner

23. What are we seeing?
• Change of use
• Uncertainty over option to tax
• Reorganisations
• Transfers of going concern
• VAT incorrectly charged

24. www.website.com
Topical update
• Domestic reverse charge for building
work
• Effective from 1 October 2019

25. VAT Update
Julie Towers – VAT Partner

26. Residential property
update
Ian Pring – Tax Director

27. Residential property update
Contents:
1. Restriction of interest relief
2. Case study – property incorporation

28. 1) Restriction of interest relief
Who is affected?
Residential property landlords
Who incur interest on borrowings relating to
their residential property business
Only individuals and partners, not
companies
Not affected:
Furnished holiday lets
Commercial property lets

29. 1) What’s changed?
Interest on borrowings:
• Treated as a tax reducer
• Reduced tax at the basic rate
• Rather than as (for all other businesses) a
deduction from profits
• Change introduced 2017/18. Three year
transition period until fully implemented
2020/21
Borrowings include
• Loans to buy/improve/renovate property
• Loans to buy other assets e.g. cars, used in
the property business

30. www.website.com
1) Transition percentages of interest incurred
Tax deduction Tax reducer
2016/17 100% 0%
2017/18 75% 25%
2018/19 50% 50%
2019/20 25% 75%
2020/21 0% 100%

31. 1) Restriction of interest relief
Example 1 – individual HR taxpayer - low gearing
2016/17 2020/21
Gross rents £9,000 £9,000
Repairs and other tax deductible costs (1,000) (1,000)
Interest on mortgage (2,000) -
Net rental profit 6,000 8,000
Tax @ 40% £2,400 £3,200
Less tax reducer (interest relief 20%
on £2,000)
(400)
Net tax liability on rental income £2,400 £2,800
Tax increase £400
Effective rate on “real” rental profit 40% 46.67%

32. 1) Restriction of interest relief
Example 2 – couple - substantial property portfolio
Married couple with jointly-owned properties 2016/17 2020/21
Gross rents £600,000 £600,000
Repairs and other tax deductible costs (200,000) (200,000)
Interest on mortgages (350,000) -
Net rental profit 50,000 400,000
Personal allowances (x2) (22,000) -
Taxable income 28,000 400,000
Basic rate tax (x2) (BR band say £35k in 20/21) 5,600 14,000
Tax @ 40% - 92,000
Tax @ 45% - 45,000
151,000
Less tax reducer (interest relief 20% on £350,000) - (70,000)
Net tax liability on rental income £5,600 £81,000
Tax increase £75,400
Effective rate on “real” rental profit 11.2% 162%

33. 1) Possible effects
In previous example
• Landlords have gone from being basic rate
taxpayers to being additional rate taxpayers!
• A high income child benefit charge (HICBC) may be
due!
• Their existing business structure is now
unsustainable!
Depending on the numbers, the rule changes could
mean that
• A taxpayer who wasn’t previously affected is
pushed into the band above £100,000 where PA is
withdrawn or
• He/she becomes an additional rate taxpayer where
they were not previously

34. 1) Restriction of interest relief - possible actions
Larger, highly geared, residential property businesses where debt
has been used to build the portfolio will be badly affected. Possible
actions to consider:
• Incorporate into a limited company – move properties and loans
• Pay down borrowings
• Switch to commercial properties
• Switch to furnished holiday lettings
• If owned by individual put into joint ownership with spouse or
operate as partnership to utilise tax bands etc.?
• Sell up?

35. 2) Case study - incorporation
Mr & Mrs Hammond own and run a portfolio of 10
residential rental properties.
Current market value of portfolio £3m
Current level of mortgage debt £1.25m
Net rental income £90k
Question
How will the interest relief restriction affect them
and should they consider incorporation?

36. www.website.com
H W
£ £ £
Net rents 140,000 70,000 70,000
Interest 50,000 25,000 25,000
Net
income 90,000 45,000 45,000
Drawings 50,000 25,000 25,000
Rental portfolio annual net income £140k (before
finance costs)
Mortgage interest charges of £50k per annum
Annual net profit of £90k
Drawings of £50k a year (after tax)
2) Case Study - incorporation

37. 2) Current projection of personal tax
2017/18 2018/19 2019/20 2020/21 2021/22
£ £ £ £ £
Net rental income 140,000 140,000 140,000 140,000 140,000
Mortgage interest (37,500) (25,000) (12,500) - -
Taxable rental profit 102,500 115,000 127,500 140,000 140,000
Tax credit (2,500) (5,000) (7,500) (10,000) (10,000)
Real net profit 90,000 90,000 90,000 90,000 90,000
Total tax payable 15,900 17,720 20,220 22,720 22,720
Effective rate on real profit 18% 20% 22% 25% 25%

38. www.website.com
2017/18 2018/19 2019/20 2020/21 2021/22
Company £ £ £ £ £
Net rental income 140,000 140,000 140,000 140,000 140,000
Mortgage interest (50,000) (50,000) (50,000) (50,000) (50,000)
Taxable rental profit 90,000 90,000 90,000 90,000 90,000
Salary 16,328 16,848 16,848 16,848 16,848
Taxable profits 73,672 73,152 73,152 73,152 73,152
Tax payable 13,998 13,898 13,898 12,435 12,435
2) Projection of corporation tax

39. 2017/18 2018/19 2019/20 2020/21 2021/22
Company £ £ £ £ £
Tax payable 13,998 13,898 13,898 12,435 12,435
Personal
Salary 16,328 16,848 16,848 16,848 16,848
Dividend 35,536 34,960 34,960 34,960 34,960
Tax payable in own hands
on salary and dividend 1,864 1,808 1,808 1,808 1,808
Total Tax Payable 15,862 15,707 15,707 14,244 14,244
2) Personal position out of the company

40. 2) Overall comparison
2017/18 2018/19 2019/20 2020/21 2021/22
Pre-Incorporation £ £ £ £ £
Total Tax Payable 15,900 17,720 20,220 22,720 22,720
Post-Incorporation
Total Tax Payable 15,862 15,707 15,707 14,244 14,244
Saving 38 2,013 4,513 8,476 8,476
Total
Retained profit personally 24,100 22,280 19,780 17,280 17,280 100,720
Retained profit in company 24,137 24,293 24,293 25,756 25,756 124,235

41. 2) Incorporation – other considerations
• Capital gains tax (‘CGT’)
• SDLT
• VAT?
• Capital allowances
• Annual tax on enveloped dwellings
(‘ATED’)
• Finance
• Administration

42. 2) Incorporation - CGT
Disposal to connected company
Irrespective of whether any consideration is
paid by the company for the transfer:
• Disposal by Mr & Mrs H at open market
value
• Acquisition by the company at open
market value
Will a capital gain arise?

43. 2) Incorporation - CGT
Rental properties:
£3m market value
£2m cost (including capital additions)
£1m chargeable gain
£280k CGT due (@28%)

44. 2) Incorporation - CGT
CGT ‘incorporation relief’ qualifying conditions:
• The business is transferred as a going concern
• All assets of the business must be transferred (other than
cash)
• Consideration for the business must be wholly or partly in the
form of an issue of shares. (Cash element chargeable – utilise
annual CGT exemptions and created director’s loan account
credit?)

45. www.website.com
2) Incorporation - CGT
Incorporation relief:
Is rental portfolio a ‘business’ or an
‘investment’ in Mr & Mrs H’s hands?
• Business = ‘active occupation’
• Activities must:
• represent a seriously pursued undertaking;
• be conducted on sound and recognised
business principles; and
• be of a kind that are commonly made by
those that seek to profit from them.

46. Incorporation relief:
The 2013 Ramsey tax case identified the following as
indicators of a business and therefore, eligibility for
s162 incorporation relief:
• Time spent on the properties, i.e. time spent
running the portfolio
• Type of activities – hands on involvement in
the day to day management of the properties
• Number of properties – the size of the
portfolio can be indicative of whether there is
a business
2) Incorporation - CGT

47. www.website.com
2) Incorporation - CGT
Incorporation relief:
Gain ‘rolled-over’ into company shares issued
as consideration
Only full CGT relief if sufficient equity exists in
portfolio to roll-over gain:
Gain £1m
Equity £1.75m
Full roll-over relief achievable

48. 1. If joint ownership (not partnership):
Company acquisition at open market value –
transfer from connected person
SDLT payable:
• £139,500 – default position
(£3m @ non-residential rates (6+ dwellings))
• £140,000 – MDR claim (10 dwellings)
((£125k @ 3% + £125k @ 5% + £50k @ 8%) =
£14,000 x 10)
2) Incorporation - SDLT

49. www.website.com
2) Incorporation - SDLT
2. If partnership:
Special partnership rules apply (Schedule 15
FA 2003) – where partners connected persons
and own company
Complex rules and anti-avoidance provisions
– seek advice - care needed!
Nil chargeable consideration = nil SDLT

50. 2) Incorporation – partnership?
Does a partnership exist?
Business must be carried on
HMRC PIM1030: “Much depends on the amount of business activity
involved. The existence of a partnership depends on a degree of
organisation similar to that required in an ordinary commercial
business.”
• Partnership Agreement?
• Partnership name?
• Partnership bank account and borrowings?
• Do both partners perform partnership duties?
• Do both partners have the authority to make deals or incur liabilities on
behalf of the partnership?
• Risks shared between partners?

51. 2) Incorporation
ATED – single dwelling >£500k value
• ATED return – submit within 30 days of
incorporation
• Relief declaration – let to 3rd parties on
commercial basis
Re-finance:
• bank/lender consent needed
• new company borrowings (higher
corporate rates and fees?)

52. www.website.com
2) Incorporation - practicalities
• New company formation
• Issue of shares as ‘consideration’ for business transfer
• Incorporation Agreement
• Cars – remove from business prior to incorporation?
• Company bank account
• Employees
• Update ASTs/leases
• Suppliers
• Utility companies
• HMO - Council
• HMRC – re company
• HMRC – re PAYE scheme
• DVLA
• etc.

53. 2) Incorporation
Hammond Limited - Opening Balance Sheet:
Fixed assets (residential properties) £3,000,000
Long-term liabilities (1,250,000)
Net assets £1,750,000
Represented by:
Share capital - paid up 100
- share premium £1,749,900
Company CGT base of property = market value. Can sell
immediately without corporation tax arising!
Shareholders:
100 shares – CGT base cost of £2m (£3m - £1m gain=) in shareholders’
hands

54. Residential Property
Ian Pring – Tax Director

55. Capital allowances &
commercial property
Paul Collings – Tax Partner

56. • Allowances are ‘misunderstood’
• Capital allowances can be significant
• If you do get it wrong…..
• Capital allowances reduce tax bills for
trading businesses – so we want to be
able to identify them
Why capital allowances?

57. www.website.com
Capital allowances
Different ‘methods’ of claiming
• Annual investment allowance -
£200,000
• Writing down allowances – 18% or 8%
reducing balance basis
• Capital allowances claimed on a variety
of items – reduce tax bills
• Machinery in a manufacturing business;
• Vans in delivery business
• Fixtures in a commercial
building

58. • Lighting
• Air conditioning
• Heating systems
Can claim capital allowances on these parts of a
building;
But NOT the bricks and mortar.
When a building changes hands the fixtures will
transfer.
What might constitute a fixture?

59. www.website.com
Fixtures
• New rules from 2012 & 2014 only relate
to fixtures
• Fixtures = plant & machinery
installed/fixed to building or land

60. The buyer must hold on ‘Capital Account’.
Since April 2014:
• Pooling Requirement
• Fixed Value Requirement
• Lose Capital Allowances??
For the buyer to claim

61. Why are we here?
• Property prices increasing
• Assessments being made of commercial property
• Formulaic approach – replacement cost
• Larger and larger claims being made – HMRC wanted to ‘cap
the cost’
• So we need to consider the rules for commercial property….

62. Commercial properties
• Owner-occupied e.g. factories
• Landlords
• Furnished holiday lets
Not applicable to:
• Residential property
• Property developers (but their customers
may be interested)
Fixtures – what properties?

63. Properties most likely to gain…
Fixture-rich properties include:
• Hotels
• Restaurants/pubs
• Residential homes
• GP or dental surgeries
• Offices
• Furnished holiday lets

64. “The vendor must include his expenditure in
his tax computations”
• A Ltd purchased a property in 2009 and is
selling it to B Ltd in 2017.
• B Ltd must have added his qualifying fixture
expenditure to his tax computations.
Pooling requirement

65. www.website.com
Bad example…
• Owner sells in October 2017 (acquired
2011)
• Property sold - £1million – potentially
£350,000 of allowances
• S198 claim at £40,000
• Later realises that fixtures on a 2012
extension were never claimed…..

66. • Must determine a value for the fixtures;
• Value is used in both computations;
• S198 election
• If can’t agree then possibility of going to
Tribunal – uncertainty and costs
Fixed value requirement

67. www.website.com
Pooling requirement
• Must ‘pool’ – but only if entitled to claim
• Gives HMRC visibility as to ‘cost’
• We might need to consider when the
property was acquired

68. Inability to claim
• Owners may have acquired the building prior to 2008…
• Integral features
• An electrical system
• A space or water heating system
• A lift, escalator or moving walkway
• External shading

69. If incurred expenditure:
• Prior to April 2008 – cannot claim
• After that date – you can claim
• Integral features – 8%
• Other fixtures – 18%
Integral features

70. www.website.com
Integral features and the pooling
requirement
• The vendor has NOT been able to claim
relief
• Provides an opportunity for the purchaser –
‘tap in’
• Moving forward important to ‘grab’ integral
features

71. • Charlie bought an office building in 2002 and
is selling it in 2017
• He meets all conditions for most fixtures
• Charlie is NOT entitled to claim for integral
features
• The new owner can look to claim in respect of
those integral features
Example 1

72. • A charity owns a freehold block of offices
• Now being sold - acquired in 2010
• The charity has never been entitled to claim
• No need for fixed value requirement or
pooling requirement
Example 2

73. www.website.com
CPSE enquiries
32.2 – “Has the vendor claimed capital
allowances or allocated any expenditure on
fixtures to a capital allowances pool”
32.3 – “If you have not pooled any
expenditure……”

74. A better question might have been…
“Is there any expenditure on fixtures qualifying
for capital allowances that you have not
pooled......”
CPSE enquiries

75. www.website.com
Conclusions
• Still we are seeing poorly completed
CPSEs
• Misunderstood by lawyers (and
accountants!)
• There are opportunities out there!

76. Opportunities
• If buying property – look out for integral features that would not
have been ‘qualifying’ in hands of the vendor
• If selling property – last chance to pool and extract value….last
chance saloon
• If residential property is becoming a FHL for the first time……
• Make sure you understand the process – seller, purchaser and
advisers!

77. Capital allowances &
commercial property
Paul Collings – Tax Partner

78. Coffee break

79. Structuring property
businesses
John Endacott – Partner and Head
of Tax

80. Structuring considerations
• Same principles apply whether developer or landlord - it’s about the
objectives
• What’s the strategy? -
• Foreseeable sale?
• Long term hold?
• How risky?
• Borrowing constraints – security, ring-fencing debt & covenants
• Ownership – single owner, business partners or family involvement
• Tax rules – what’s the driver?
• Taxation of the SPV’s income?
• Extraction of the profit?
• Minimising tax on death?
• Could be LLP or Ltd company – usually Ltd company

81. Group or
Parallel?

82. Parallel share ownership
SPV 1 re
development 1
SPV 2 re
development 2
SPV 3,4,
etc
Individual
shareholder(s)

83. Parallel structure – tax issues
• Capital gain - 10/20%
• Income profit (dividend) – 38.1%
• Anti-avoidance rules to stop converting income into gains:
• Old – Transactions in Securities
• New – Liquidation TAAR
• Made tougher – Transactions in Land
• 20% is good but it’s still twice 10%
• Only trading companies qualify for 10% tax rate on gains

84. Group share ownership
Shareholder(s)
Holding
company
SPV 2SPV 1 SPV 3, 4, etc

85. Entrepreneurs’ relief
• Entrepreneurs’ relief is attractive but:
• £10m lifetime limit
• Still tax payable unlike Substantial Shareholdings Exemption
• It may not last
• Is business property relief really more important than tax on a
gain?
• What about succession planning?
• What’s does the future look like

86. What does the future look like?

87. Can you have your cake and eat it?
• What about
• Extracting substantial value at 10/20%; and
• Pass on the business to the children.
• It’s possible to sell the existing business to the next generation
on deferred terms – a family MBO
• Something to think about before next April
• Could work well for a developing business going from a
parallel structure to a group structure

88. Think about
fragmenting the
share
ownership

89. Minority discounts for landlord businesses
HMRC have given the following as guidance on minority share
valuation discounts for investment companies:

90. Now is a good
time to re-visit
your business
structure

91. Structuring property
businesses
John Endacott – Partner
and Head of Tax

92. Funding and Finance
Rob Gear -
Corporate Finance Director

93. Contents
• State of UK economy
• Outlook for interest rates
• Funding
• Transactions

94. State of the UK economy
• Need to consider both international and domestic
• ‘Brexit boom?’
• Some recent historic economic data is positive
• Stock exchanges peaking / Exports up
• Low unemployment
• Some evidence of recovery of retail sales…. But
• Outlook has worsened:
• Store closures, jobs losses
• Brexit has potential to cause negative shock
• China / US trade wars
• Forward planning is essential…..

95. How has the UK performed since 2000?
1.6%
1.4%
2018 2019

96. Oil prices on the rise?
Source: Brent crude oil prices
OPEC price war
Strong non-OPEC
production
increasing supply
Arab Spring / Libyan
crisis
Increase in US
Shale output
OPEC cuts supplies
Heightened tension in Middle East
Credit crunch
Over
$80

97. The £ has got cheaper
2008 2010 2012 2014 2016 2018
Euro – red line
$ – blue line
Drop by 24%
Drop by 20%

98. Unemployment at record lows
4%
2008
Financial crisis
1990/1991
Financial crisis
1980/1981
Financial crisis

99. How compare to the euro-area?
Source: Eurostat.

100. Expect wage growth to pick up?
Bank of England : AWE total pay excluding bonuses and arrears of pay
Construction
Financial services
Hotels / restaurants
Health and social work
Utilities
Agriculture

101. House price inflation has slowed since 2014
Sources: Bank of England

102. Summary
• 2nd half of 2018 will be crunch time for Brexit
negotiations
• Large companies delaying investment decisions /
reducing the working week
• On a brighter note, small and medium sized companies
seemed relatively unaffected
• Property market remains resilient
• Transparency and liquidity are the 2 main selling points of UK
real estate investment
• This expected to continue with new sources of overseas capital

103. www.website.com
• Who would be a forecaster?
What is outlook for interest rates?

104. What's happened to Prices Vs Interest rates?
Source: ONS
2006 2008 2010 2012 2014 2016 2018
Inflation
target 2%
2.6%

105. What is the future for interest rates?
Sources: Bank of England, Bloomberg Finance L.P., ECB and Federal Reserve.

106. Funding update
• Property encompasses large category
• Property funding cover wide range
• Traditionally high street banks
• Increasing range of finance available
• Alternative funders (reflect risk and price)
• Challenger banks
• P2P
• Regional property specialists
• More use of platforms to access them efficiently
BUT getting tougher with more uncertainty on the way?

107. Alternative Finance
• May prove a real threat to banking industry
• Loan to Value (LTVs)
• P2P has been important part of the mix
• Generally more expensive
• High fees are a price worth paying…..
• Short term bridging finance
• Get quicker decision
• Number of property only funders
• Can be difficult to get additional funding if over-run
• Variety of projects – housing, office conversion, shopping
centre development
• Some platforms are being backed by institutional funders
• Funding Circle raised £300m float at £1.5bn valuation

108. Alternative Finance – lending volumes
Source: AltFi Data
2014 2015 2016 2017 2018
£600m

109. AltFi – weighted average interest rates
Source: AltFi Data
2014 2015 2016 2017 2018
16%
14%
12%
10%
8%
6%
4%
2%
0%
4%-8%
4%-16%

110. What to think about when seeking funding?
Business Planning
Financial Projections
Housekeeping and
addressing issues
….and expect to be asked about Brexit, exchange rate movements,
how you coped with the last recession, and ‘what if?’ questions

111. Torquay leisure Hotels
4 hotels
17 acre site – over 400 bedrooms
- Derwent
- Victoria
- Toorak
- Carlton
Leisure complex

112. Burgh Island

113. Agricultural land

114. Funding and Finance
Rob Gear -
Corporate Finance Director

115. Retail Insolvencies
Nick Harris –
Licenced Insolvency
Practitioner

116. Retail Sector and Insolvencies
• Retail insolvencies and reasons
• Company Voluntary Arrangement
• What can landlords do?
• The future?

117. Corporate insolvency

118. Personal insolvency

119. High street casualties

120. Retail insolvencies
Source: Centre for Retail Research

121. Why has retail been hit so hard?
• High fixed cost base
• Increased competition
• Credit insurance problems

122. • Contract between company and creditors
• Can propose anything (as long as no unfair
prejudice)
• Binding on all creditors if >75% (in value)
agree
• Landlord votes - unsecured
• Secured creditors not bound
• Directors remain in control
Company Voluntary Arrangement

123. What can be done by a CVA?
• Reduce payment to creditors
• Defer payment
• Amend terms of lease
• Frequency of rent
• Splitting of stores into classes

124. Carpetright
Estimated return for : CVA Liquidation
Accelerated sale (in
adminisitration)
Category A Landlords N/A - retained in full Nil N/A - retained in full
Category B1 Landlords 78.1 p in the £ Nil 0.4 p in the £
Category B2 Landlords 36.7 p in the £ Nil 0.4 p in the £
Category C Landlords 6.1 p in the £ Nil 0.4 p in the £

125. House of Fraser

126. www.website.com
What can landlords do?
• Act quickly (14 days notice of creditors
meeting)
• Seek advice – long technical documents…
• Lower rent
• Vote against – find new tenant?
• Clause in the lease
• 25% modications…? Group together

127. www.website.com
The Future
• British Property Federation – unfair
prejudice?
• Government review
• The ‘Next’ clause
• Abuse of process?
• Future insolvency reforms

128. Retail insolvencies
New Bargain Buys store opens in Exeter to huge
queues of people (Devon Live, 21/09/18)

129. Retail Insolvencies
Nick Harris –
Licenced Insolvency
Practitioner

130. The sector, the
politics, the future
John Endacott – Partner
and Head of Tax

131. Commercial industrial property – a safe bet?

132. Changes in office markets

133. Have we reached peak student/retirement
accommodation?

134. Planned growth in social housing – could it be the new
renewables?

135. Changing in housing markets
……..

136. Budget 2018
Monday 29th October
Monday 29
October

137. Brexit

138. Rebuilding Britain…

139. 1919 – Francis S Clark set up office in Newton Abbot
1929 – Wall Street crash
1939 – WWII
1970 – UK joined the EU
1992 – Black Monday
2019 – Brexit
PKF Francis Clark centenary
99 years…and counting

140. Disclaimer & copyright
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