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Law Firms may need to tread a careful financial path after stamp duty hike

Law Firms may need to tread a careful path

Law firms specialising in conveyancing may encounter increased cash flow pressures as the Government's decision to impose an increase in stamp duty land tax (SDLT) begins to impact the housing market.

From 1 April 2016, anyone buying a second home for any purpose must now pay a rate of three percentage points higher than the standard SDLT rate, adding £6,000 to the upfront cost of buying a £200,000 property.

The considerable increase initially sparked a noticeable surge in the number of buy-to-let investors wanting to purchase up until 31 March, leading to many solicitors working over the bank holiday weekend to ensure deals were completed in time.

The housing 'boom' at the start of this year provided a welcome upturn in customer numbers for some law firms who had previously suffered difficult times as a result of subdued market activity. However the real challenge starts now as most estate agents and surveyors anticipate a property investment slowdown amid a 'climate of uncertainty' due to the changes to stamp duty and next month's EU referendum. 

According to research from the Royal Institution of Chartered Surveyors (Rics), house sales are expected to fall for the first time since 2008 and may not increase in the short-term. London could be particularly affected with 38% more of the survey's respondents working in the capital expecting house prices to fall rather than rise over the next three months.

Leading property group Foxtons has also warned of a slower sales pipeline for the second quarter despite the company seeing a 16% jump in revenues in Q1.

The combination of the above factors could have significant implications for law firms who have already exhausted avenues to cut costs to maintain cash flow. There are alternative options to consider though. Short or long-term commercial loans from specialist finance providers can help companies to bridge their funding gaps and mitigate the impact when they are hit with additional expenditure - either expected or unexpected.

Lenders with an intrinsic understanding of the legal profession, including Wesleyan Bank, can arrange tailored professional indemnity insurance, tax funding and VAT finance solutions at short notice and pay the money to the firm's chosen insurer or broker and HMRC on its behalf. This enables them to make regular monthly repayments that meet their requirements and spread the cost to avoid cash flow spikes arising from one off large bills.

Commercial loans can also lessen the burden on capital expenditure and be used to fund investment in upgrading office equipment and furniture, improving IT and telecoms systems as well as carrying out acquisitions and mergers.

The inevitable speculation over 'Brexit' and rise in SDLT has heralded a period of uncertainty in the housing market. But in the event of the worst case scenario, law firms can seek comfort from specialist financial lenders who can fulfil all of their borrowing needs.

'WESLEYAN’ is a trading name of the Wesleyan Group of companies.

Wesleyan Assurance Society and Wesleyan Bank Ltd are authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Wesleyan Financial Services Ltd, Wesleyan Unit Trust Managers Ltd, Practice Plan Ltd and DPAS Ltd are authorised and regulated by the Financial Conduct Authority.  Advice about investments, insurance and mortgages is provided by Wesleyan Financial Services Ltd.

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