ISSUE 3 | SPRING 2005

Stamp Duty – 12 months on Full story - Page 2 New Contract Won See Page 1 Market Changes See Page 3

Bespoke Area Guide

Screen shot of Opening Page & Property Price Mapping

Cable & Wireless –

Moving with Phoenix

Cable & Wireless, the leading international telecommunications company, with customers in 80 countries and a history of embracing the latest technological advances over the last 130 years, has chosen Phoenix ARC to assist with forthcoming employee relocations that are occurring as part of their forthcoming business re-engineering.

Certain employees will be relocating to either the Cable & Wireless Birmingham office or Bracknell Headquarters and will receive support from Phoenix ARC, which will include existing home sale and new home search assistance.

This has been supported with our development of a bespoke web-based online guide, offering employees and their family detailed information on living and working around the Cable & Wireless Bracknell campus, which will be used by Cable & Wireless for ongoing staff recruitment and retention.

For any further information or for details on our web-based online guide, please contact Liz Halifax-Smith @ liz.halifax-smith@phoenixarc.com or telephone 0870 300 2525.

Raj Patel – Finance Director

Phoenix Implement New Accounts System

Phoenix has made a substantial investment in purchasing a bespoke accounting system and we are currently undertaking a hopefully seamless transition! We anticipate the new system will be fully operational by the summer. 

Some of the benefits to our clients will include:

• Ability to log in and view up to date financial position for each case
• Fluid P11D reporting
• Clear visibility on qualifying and non-qualifying costs
• Reduction in paper flow

Stamp Duty Land Tax – 12 Months On

Since the introduction of the new UK Stamp Duty Land Tax (SDLT) regulations in December 2003, we have now had the opportunity to review some of the issues that have arisen as a result of the changes and are able to report on how this has impacted on some relocations to date.

To recap, the main amendments to the regulations were that SDLT would now become payable on contracts for the sale of land which were “substantially performed”.   In relation to relocation, “substantially performed” means when the employee receives the Guaranteed Purchase Price funding for their home.

Certain reliefs, however, were introduced by the Finance Act 2003 that allow many relocation moves to occur without the SDLT becoming payable.  In order for a relocation move to qualify for this “relief” certain criteria must be met. 

Below are some of the issues that have come into focus over the last 12 months:

Legal Ownership

One of the most important changes that Employers need to be aware of is that SDLT Exemption will now only be granted where the relocating

Employee owns in whole or in part the property to be sold.

This appears to be a minor change at first glance.

However, with an increasing number of couples co-habiting rather than getting married and with single-sex couples qualifying for relocation, Employers need to be certain that the Employee relocating holds a genuine

beneficial interest in the property. 

This can be done in one of two ways:

Effecting a transfer into the joint name of the employee

or

The legal owner signing a declaration of trust in favour of the employee

If neither of these can be satisfied, the property can still be taken in under the relocation scheme as long as the Client is willing to pay the SDLT on the transaction.

 Definition of “at some time”

Another criterion that has to be met is probably the main cause of SDLT having to be paid on relocation moves.  This stipulates that the relocating employee must “at some time” have been resident in the property within the two-year period preceding the relocation. 

This is obviously an area which affects the long term International Assignment more than most and if you feel this could affect future relocations please contact us and we can advise of alternative solutions that should be undertaken to minimise costs to yourselves.

Further clarification has been sought from the Inland Revenue to establish the definition of “at some time”, however, these have been unsuccessful and it still remains a matter of conjecture as to the exact period of time that meets this requirement.

However, an overnight or a weekend stay will not be enough to satisfy this criterion, but at this time it remains impossible to provide firm guidance.

Eligibility

To summarise, further criteria that must be met in order to qualify for relocation “relief”:

• The employee must hold a genuine beneficial interest in the property
• The employee must “at some time” have been resident in the property within a two year period ending with the relocation
• Phoenix’ purchase must be made in connection with a change of residence resulting from the relocation of employment;

a)      Alteration of duties

b)      Alteration where those duties are performed

c)       Recruitment

Should you require any advice, or have any concerns about this change, then please do feel free to contact us at enquiries@phoenixarc.com   

Congratulations Maggie!

We are pleased to confirm that Maggie Cross has been promoted to Destination Services Manager as of January 2005. 

Maggie has over 10 years of relocation experience, 5 of which have been with Phoenix in the International team.

Property Market –

What’s in store for 2005?

The Housing Market in the UK is a subject about which everybody seems to have a firm opinion. It is impossible to avoid the views of commentators and economic experts in the media, whose views seem to vary from overly optimistic about the future, to those who are wildly pessimistic.

So, whom should we believe? Is the market set for a gradual slowdown this year, or are we heading for a sharp readjustment in prices?

We cannot pretend to be certain about the prospects for the housing market this year, particularly given that market conditions in different areas of the country vary significantly. However, we can look at the information provided by some of the leading market indices and draw our own conclusions about what 2005 may hold for the property market.

Interest Rates

Whilst it has appeared for some months that the next move in interest rates was likely to be downward, the minutes of the most recent Bank of England Monetary Policy Committee (MPC) have changed this view significantly.

The Bank of England Base Rate has been steady at 4.75% since August 2004, but the minutes of the February 2005 Meeting show that one of the committee members had voted for an increase in the

Base Rate for the first time since August –all MPC meetings prior to February have produced a unanimous verdict to maintain the rate of 4.75%.

It is now anticipated that the base rate will rise 0.25% in the next month or two.

Four interest rate rises and widely reported comments by the Governor of the Bank of England, Mr Mervyn King, about the level of household debt in the UK, had the cumulative effect of dampening the housing market during 2004. However, a further rise is unlikely to significantly affect the market further in 2005, with most commentators now expecting rates to peak at between 5 and 5.5% between now and the end of the year.

National House Price Indices

Nationwide Building Society

The Nationwide forecast a small rise in house prices over the course of 2005, in the range 0 – 5%, although their monthly House Prices Study reported rises in January of 0.4%, and 0.5% in February. However, they feel that the likelihood is that house price growth during the year will be muted with small rises in some months being offset by small falls in others.

Nationwide consider that the economic outlook remains “benign” with the economy expected to grow at close to the expected trend, and unemployment remaining low. They expect interest rates to rise, with the continued strength of the housing market making this more likely. However, they do feel that this outlook would suggest that there are no obvious “triggers” which may lead to a significant downward movement in house prices.

Given the reduced number of transactions reported since the market slowed in mid-2004, Nationwide see the biggest potential risk as generalised price falls due to panic sales (with the effect being magnified by the low number of transactions). However, both buyers and sellers now appear to have more realistic expectations of future house price growth, and this downward adjustment in expectations appears to have been key in creating the “soft landing” for the market that had been widely hoped for.

Nationwide further report that realistically priced properties are attracting interest from potential purchasers, whilst sellers setting overly-ambitious asking prices can expect their property to remain on the market for a long period.

Halifax

The Halifax House Price Index often provides a different view of the market when compared to Nationwide, primarily due to the differing locations covered by their branch networks, and their prediction for 2005 is no exception.

Halifax actually expect a fall in house prices during 2005 of around 2% and reported a fall in prices in February of 0.5% against reported rises in December and January.  However, they do feel that this continues the theme of a mixed pattern of monthly price rises and falls recorded since the summer of 2004 which appears to be “consistent with a gradual slowdown in house price inflation”.

Estate Agents are also reporting signs of activity in the market stabilising, with a recent increase in the number of sales agreed and a levelling out of the number of enquiries from new purchasers following a sharp decline in the latter half of 2004.

Halifax reports that the labour market is strengthening with the number of people in employment

rising by almost 300,000 over the last calendar year.  This factor, and the continued growth of the UK economy, continues to provide “a solid support for the housing market, helping to maintain its sound underlying health.”

Finally, Halifax believes that interest rates are near to their peak. Although a short term rise in the base rate may be seen due to the strengthening of the housing and labour markets, the slowdown in consumer spending and the rate of house price increases may be sufficient to avoid a further increase and perhaps even provide scope for a rate cut later in the year.

Royal Institute of Chartered Surveyors (RICS)

The RICS broadly agrees with the Nationwide forecast for 2005, in

that they expect house prices to rise at about 3% over the course of the year.

Whilst the first half of the year is likely to continue to be weak, activity is expected to increase in the second half of the year, providing the underlying strength of the economy and the growth in employment continues.  Latest information from the RICS reports that these sentiments appear to be borne out by market activity seen since the start of the year. Their latest survey, covering activity in January, reported the first rise in newly agreed sales since April 2004, with the number of new buyer enquiries remained steady for the third successive month, following a sharp reduction in the latter half of 2004.

Conclusion

Whilst the Halifax and Nationwide have slightly different views on where house price growth will be come the end of 2005, they broadly agree that price inflation seems set for the “soft landing” scenario, where price inflation slows without the market “crash” that some of the more bearish commentators have been predicting.  The most recent data from Halifax, Nationwide, and the RICS suggests that the activity in the housing market since the New Year seems to support this position, with the level of new enquiries being maintained and the first small rise in the number of agreed sales since the second quarter of 2004.  Providing there is no dramatic change in the UK (or Global) economy,

and the labour market remains strong, then none of the often talked about “triggers” for a dramatic readjustment in prices exist, suggesting a broadly stable market in 2005.

However, we would stress that the key to selling properties in this market place seems to be careful marketing and realistic pricing, with good quality, competitively priced properties selling well.

Phoenix ARC has a pro-active approach to marketing our property inventory, appointing only the most suitable marketing agent for a given property and working closely with the Agent to attain the best possible selling price for our Corporate Clients.

Uniquely, Phoenix provides our Clients with a Home Visit service. This enables the consultant not only to meet the employee and their families to address any concerns but also allows us to investigate first hand the local agents and factors which may affect the saleability of the property.   This enables us to question the valuations with first hand knowledge of the properties. Where the Home Visit service has taken place, it has proven to reduce the potential risk to the client along with reducing the overall sale time of a property.  For more information about this service please contact:

juliette.wilcock@phoenixarc.com

What our Clients’ employees said about us this month

“Liz Evans and her team, including Christine, did a superb job of taking care of us and tending to our needs throughout the move.  All issues were immediately addressed and resolved.  Superb Customer Service.”

Mr W – Chevron Texaco

“I would like to thank Pauline Pilcher and Carol Bewick for their excellent work.  The best removal in my life so far.”

Dr B – TMP

“I have been very happy with my consultant who always updated me and responded to my calls.”

Ms H – Pfizer

“Phoenix ARC was very professional, friendly and helpful.  They anticipated our needs and were well prepared for our questions.  Liz Evans did an excellent job to close negotiations quickly and to the satisfaction of all.  Great job – Thanks!”

Mr K – Chevron Texaco