Pre-Election Budget – A Property Perspective

Against a background of encouraging economic data – sustained GDP growth, rising employment and low inflation – and with an imminent General Election on 7 May, the Chancellor wants us to believe that “Britain is walking tall again“. From a property perspective, the focus of the Budget appears to be toward stimulating growth through encouraging & support of housing, infrastructure and development.

 

House Building

  • 20 Housing Zones outside London will pilot models of accelerated delivery for new homes on brownfield sites using streamlined planning powers including Local Development Orders (LDO’s); this regeneration could provide up to 34,000 new homes. In addition, 8 other potential Housing Zones are being considered which could deliver a further 11,000 new homes.
  • In Yorkshire two successful pilots announced, namely the Aire River Growth Corridor (Wakefield Council) and York Central Housing Zone (City of York Council).

 

Strategic Management of Government Land & Property

  • A commercially-driven approach based on Government departments paying market rents with new central bodies to own and manage property & land assets; intended to deliver efficiencies and release land & property for productive uses, including new homes.
  • Designed to encourage more efficient use of space and help Government achieve its £5 billion disposals target by 2020.
  • £1M for the London Land Commission to create a comprehensive database of public sector and brownfield land.

 

Development & Infrastructure

  • Consultation on the devolution of planning powers in London over sightlines and wharves to the Mayor of London, to accelerate provision of new homes by reducing planning delays.
  • Government funding to support potential housing and infrastructure schemes in Brent Cross, Croydon, Barking Riverside, Northstowe, Ebbsfleet and Bicester.
  • Consultation into the Compulsory Purchase regime to make it clearer, faster and fairer to support brownfield development.

 

Help to Buy ISA

  • Enables first-time buyers to save up to £200 a month over a 5-year period (max £12,000), to which the Government will provide a bonus of 25% (max £3,000), at the point savings are used to purchase a first home.
  • Property values restricted to £450,000 (in London) and £250,000 (outside London).

 

CGT on non-residents disposing of UK residential property

  • CGT will be payable on future gains made by non-residents disposing of UK residential property from April 2015.
  • Non-resident individuals will be taxed at up to 28% and non-resident companies at 20%.

 

Annual Tax on Enveloped Dwellings (ATED)

  • Anti-avoidance rules are being extended to those owning UK residential property worth over £500,000 (previously £2,000,000), held within a company, partnership or collective investment scheme.
  • For properties worth £1,000,000 – £2,000,000, ATED will be £7,000 (effective from 1 April 2015), and for properties between £500,000 – £1,000,000 it will be £3,500 (effective from 1 April 2016).
  • Disposals by companies falling within the ATED regime will be subject to CGT at 28% whether non-resident or a UK company.

 

Business Rates

  • Consultation on a reform of business rates however, a requirement that it is to be tax-neutral is likely to result in winners and losers.
  • Pilot schemes allowing local authorities in Cambridgeshire, Peterborough, Greater Manchester and East Cheshire to retain 100% of additional growth in business rates above expected forecasts from 1 April 2015.

 

Capital Allowances

  • Current Annual Investment Allowance (AIA) £500,000 due to end on 31 December 2015, reducing to £25,000; Chancellor indicated AIA would be set at a much higher rate than £25,000, but any announcement reserved for the Autumn Statement.
  • AIA enables qualifying businesses (which Government estimates as 99.8% of businesses) to receive 100% up-front relief on their qualifying investment in plant & machinery.
  • A new anti-avoidance provision to disallow plant & machinery allowance in a building on a sale & lease-back or a transfer to a connected person where the transferor held the building as trading stock.

 

Entrepreneurs Relief

  • Available if disposing of shares in a trading company which trades in its own right
  • HMRC to critically examine company structures (such as property joint ventures) in assessing whether they meet qualifying criteria.

 

SDLT Seeding Relief

  • Introduction of seeding relief for Property Authorised Investment Funds (‘PAIFs’) and Co-ownership Authorised Contractual Schemes (‘CoACSs’) to enable institutions forming new property funds, seeded by transferring their existing assets into a PAIF or CoACS, without triggering SDLT.