Scilly’s MP, Andrew George, is to question the Government next Monday evening when he raises the issue of a new tax loophole, which could see a further rise in the number of second homes in places like West Cornwall and the Isles of Scilly.
Mr George, who led the Commons campaign to remove the 50% Council Tax discount for second homes that was largely scrapped in April, has argued that the Pre-budget report last year set out proposals to allow private pension schemes to invest in domestic property including second homes.
Self Invested Personal Pensions (SIPPs) could be used by wealthier self-employed and small business operations to get 40% tax relief on the money used to purchase holiday homes and exemption from any capital gains tax on the sale of the property, were the proceeds re-invested in a pension plan.
Mr George will lead the Commons debate on Monday, when he also plans to raise questions about the basis of the Barker Review and call on the Government to start creating a new ‘intermediate’ housing market. Commenting ahead of the debate, Mr George told Scilly News: “The Government’s proposal is to allow those who benefit from the tax rebates, through Self-Investment Personal Pensions (SIPPs), to invest in residential property. This could be used by wealthy self-employed and business operations to get 40% tax relief on money used to purchase holiday homes, and exemption from the capital gains tax on the sale of the property.
“No accommodation on the market now is affordable to local people on local wages. If the Government implements its plan the situation would certainly get even worse.
“Many pension schemes are seriously failing and I am sure that many business people and the self-employed will find the option of using their investment money for the purchase of a holiday home very attractive. But in the present climate, this would seriously inflate still further the market for second and holiday homes in places like Cornwall and the Isles of Scilly and, hence, the private housing market generally.
“This is likely to be very bad news for locals, especially young local people who are already suffering in what is an appalling and unprecedented housing crisis; in fact the worse crisis in living memory.
“I am encouraging the Government to restrict the opportunity to use SIPPs only on residential property which is then made available on the local private rented market under a long-term lease or acceptable tenancy or to be used for portfolios of shared-equity accommodation for locals. That restriction might help relieve some local problems. But without it, the housing problems of locals will be made significantly worse.
“Through judicious targeting, the Government could create a virtuous pension investment scheme; one which not only helps these private investors who want to save for their retirement but which would put money into housing initiatives to meet local need.”