Stamp duty lifted for deprived areas

Regeneration

The Chancellor delivered a triple boost to disadvantaged areas when he announced plans to abolish stamp duty on sales of cheaper homes alongside a community investment tax and a community development fund.

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The Chancellor delivered a triple boost to disadvantaged areas when he announced plans to abolish stamp duty on sales of cheaper homes alongside a community investment tax and a community development fund.

From Friday, stamp duty on properties worth up to £150,000 will be scrapped in nearly 2,000 of the poorest areas. Next year, stamp-duty thresholds will be raised significantly or abolished for commercial property transactions in these areas. Stamp duty is now levied at 1 per cent on homes worth between £60,000 and £250,000, rising to 3 per cent on homes between £250,000 and £500,000, and 4 per cent above that.

The areas covered by the changes include large parts of Merseyside and the North-east as well as parts of London's poorer boroughs, such as Hackney and Tower Hamlets.

The Regeneration minister, Lord Falconer, said: "This is great news for businesses and homeowners in some of our poorest areas. It will encourage both to locate and thrive in wards that badly need investment." Estate agents also welcomed the move. Ian Davies, regional business director of Bradford & Bingley estate agents, said: "This is an excellent move for people who are wanting to enter the property market, by making first-time buyer properties, in particular, more affordable whilst maintaining the status quo in price brackets over £150,000."

Charles Webb of the Camden Bus estate agency in north London, said £150,000 would buy a one-bedroom flat in the area. "It will affect the market positively because the whole property chain depends on first-time buyers getting on to the property ladder."

However, some experts said the change could be negative. "It could create 'red line' areas with people saying they don't want to buy in a place which has been officially designated as disadvantaged," one said.

The community development fund is a £40m private-public venture capital fund which will come into force early next year. It will invest solely in businesses in disadvantaged areas. Sir Ronald Cohen, chairman of the Government's social investment task force and chairman of Apax Partners, said his early discussions with the private sector had been encouraging.

The community investment tax will involve a tax credit worth 25 per cent of investment spread over five years to individuals or companies which provide capital to community development finance institutions. These provide backing to enterprises excluded from mainstream finance. One of the changes will see the removal of the overall cap on the amount of investment which attracts the credit in any one year.

The qualifying wards in England are the bottom 15 per cent as identified by the 2000 Index of Deprivation.