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House & Home

Property: Tricky moves leave the taxman behind

MORE THAN 70,000 people who will move home in the coming year because of their jobs have been quietly rescued from huge tax bills. An obscure change in the last Budget decreed that anyone receiving more than pounds 8,000 in allowances from employers for relocating would be taxed as for any other perk. But people moving jobs see hotel bills and schemes for selling their homes as essential expenses rather than perks. The Confederation of British Industry agreed, saying this was merely an underhand way of raising pounds 250m a year for the Treasury - a dangerous one at that since it discouraged companies from moving staff.

Now John Carolan of Black Horse Relocation has spiked the Government's guns by working out a scheme with the Inland Revenue that restores the old order. As long as the relocation agent acts on behalf of the employer, the costs of moving will not be considered taxable, he says.

This could result in a wave of buyers, as relocation has almost ground to a halt since the Budget.

Groups such as Black Horse Relocation offer guaranteed prices for movers' homes, so they can search in a new area as a cash buyer. Employers meet all the costs involved in selling the old home, including any losses.

'It only required rewording of the agreements, because the law allows companies to buy and sell property without incurring tax bills,' Mr Carolan says.

All that is left for the Treasury to tax are any disturbance allowances, hotel bills and the purchase costs of a new home. And if these remain below pounds 8,000, movers will escape completely. Kenneth Clarke may have to look elsewhere for his pounds 250m annual bonus.

SELLERS of holiday homes will be hoping for a flood of calls over the next few weeks. Currencies such as the peseta and escudo are expected to continue to British owners who rushed into overseas property during the boom have had problems extricating themselves as mortgage costs soared and jobs disappeared. Meanwhile, prices fell by as much as 35 per cent in rural France and around the Mediterranean. More than 10,000 homes are on the market on the Costa del Sol alone, and this could be a mere fraction of the property that owners want to offload.

The problem was exacerbated as the pound plunged in value, but now the boot is on the other foot. Spain, France and Portugal are suffering devaluation just at the time they are packed with holidaymakers - or with potential buyers, as the owners see it.

Barry Randal-Williams of Hamptons International in Marbella warns sellers against being greedy, however. 'When the value of the peseta dropped last December, many owners increased prices to compensate, but the tactic did not work,' he says. But this time around they are more eager to net a buyer than cut losses.

Mr Randal-Williams says that the devaluation has produced bargains such as apartments on Marbella's Golden Mile, which until recently cost pounds 153,000 but are now worth less than pounds 130,000 because of the change in currency rates.

THE GOVERNMENT has ignored its own advisers and decided to push ahead with grant cuts for housing associations next year. Ministers insist that the groups must raise another 5 per cent from private lenders to pay for homes, despite warnings that this will send rents soaring and reduce the chances of tenants saving to buy their own property.

The Housing Corporation had recommended keeping grant levels at the current 67 per cent of costs, and a parliamentary select committee said several associations faced collapse because they could not raise more private money.

Yet Sir George Young, the housing minister, has made it clear that he will favour associations that do not ask for the full 62 per cent, and expects them to sell more homes to tenants to raise money. The Government originally planned bigger cuts, backing off only because of protests. It could still slash support to about half the cost of each new home by the mid-Nineties.

Campaigners claim no money is saved because housing benefits cover many tenants, and soaring rents will draw more into this net. That could turn estates into ghettos, as unemployed tenants would find they could not afford to forfeit benefits by taking work.