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UK Property Taxes Context Commercial Residential

VAT  Commercial property only  TOGCs

Mansion tax? £2m threshold £2m – 3m - £3,000 p.a. Over £3m - £28,000 p.a.

ATED  £1m threshold  £500k from April 2016  £1m – 2m - £7,000 p.a.  £2m – 5m - £23,350 p.a.  £5m – 10 m – £54,450  £10m – 20 m - £109,050  over £20m – £218,200 50% increase – causing problems for historic ownership structures

ATED Conditions UK residential property “non-natural person” Not acting as nominee or trustee

ATED Exemptions  Commercial letting to third parties  Development and re-sale  Not occupied by a connected person Returns must be submitted and reliefs claimed within 30 days of completion

Why was ATED introduced? Advantages of “non-natural persons” –  Avoids stamp duty land tax on sale  Avoids inheritance tax (non-doms only)

Stamp Duty Land Tax  Introduced in 2003  No more “resting on contract”  4 December 2014  Rates up to 12% (over £1.5m) for residential property Multiple dwellings relief

Commercial property SDLT  4%  Purchase of 6 or more dwellings

15% SDLT  UK residential property  Non-natural person  Over £500k (originally £2m)  Exemptions as for ATED

Inheritance Tax  40%  Nil-rate band  £325,000 (transferable)  £1m nil-rate band?  Non-doms

IHT Planning  GWR/POAT  Gift shares in rental properties while retaining income?  Keep assets separate to avoid GWR

Capital Gains Tax Previously only applied to UK residents, except for:  Temporary non-residents  Non-residents liable for ATED related gain

Non-residents now liable to CGT on UK residential property  Individuals, “close” companies and trusts  Gains from 5 April 2015  Valuations  Returns within 30 days of sale  Private residence relief – new 90 days rule

Rental Property  Individual  Corporate  BIM (individuals only)

Property Sound Portfolio Investment or Overvalued Asset Class? Matthew Hunt June 2015

18  Returns from property – the historical perspective  Valuation of property – cheap or expensive?  The market environment – supply and demand  Investment strategy Agenda

19 Property Total Returns 1983 – 2015: Beware the Cycle Source: IPD Worst 12m : -27% Best 12m : +30% Average : +7.8%

20 Commercial Property Returns – A Rollercoaster Ride Source: IPD

21 Bonds Have Less Downside Source: IPD, Reuters Correlation to Gilts: -0.2

22 Equities Have More Upside Source: IPD Correlation to Equities: 0.5

23 UK Asset Class Valuations – Property 4% Range Source: Bloomberg

24 UK Asset Class Valuations – Beware the Crossover Source: IPD, Reuters

25 UK Asset Class Valuations – Property Relatively Attractive Source: IPD, Reuters

26 UK Transaction Volumes Rising as Confidence Grows Source: IPD, M&G

27 Limited Construction Supports Rental Growth Source: M&G

28 Prime vs Secondary: Yield Gap Now Contracting Source: M&G

29 Offices: Regions Catching Up London Rents falling Rents bottoming out Rental Growth Accelerating Manchester City Edinburgh, Glasgow Thames Valley, Bristol Birmingham, Leeds West End Source: M&G

OPEN-ENDED FUND  Direct exposure to cycle  Management added value  Liquidity constraints  Cash drag  Risk of lock-up  Specialist funds available CLOSED-ENDED FUND  Premium / discount to NAV  Management added value  Benefit / risk of leverage  Reasonable liquidity QUOTED EQUITY  Premium / discount to NAV  Development potential  Benefit / risk of leverage  Good liquidity 30 Different Types of Property Investment

31 Different Investment Strategies: Leverage = Volatility

32  Property is volatile and cyclical  Property valuations remain attractive  Financing availability is supporting demand  Supply is limited and is driving up prices  Rental income is rising  The cycle is well advanced in London, beginning in regions  Choose your investment vehicle carefully Conclusions

33  “The information in this document is believed to be correct but cannot be guaranteed. Opinions and forecasts constitute our judgment as at the date of issue and are subject to change without notice. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors. Before contemplating any transaction, you should consult your financial adviser.  The research and analysis in this document have been procured, and may have been acted upon, by Prospect Wealth Management and connected companies for their own purposes, and the results are being made available to you on this understanding. Prospect Wealth Management, its clients, officers and connected companies may have a position, or engage in transactions, in any of the securities mentioned.  Neither Prospect Wealth Management nor any connected company accepts responsibility for any direct or indirect or consequential loss suffered by you or any other person as a result of your acting, or deciding not to act, in reliance upon such research and analysis. Past performance is not a reliable indicator of future results. Forecasts are not a reliable indicator of future performance.”  Prospect Wealth Management (PWM) is a trade name of Raymond James Investment Services Limited (RJIS) utilised under exclusive licence. RJIS is a member of the London Stock Exchange and is authorised and regulated by the Financial Conduct Authority Registered in England and Wales number Registered Office 77 Cornhill London EC3V 3QQ Risk Warning