Steve Roberts looks at the key property-related developments in November’s Budget.
The chancellor delivered his Autumn Budget treading a balance between addressing the Brexit issues facing the country, and the problems of making significant policy announcements in a minority government. He confirmed, as many had predicted, that GDP would be revised downwards, providing further evidence of the productivity gap.
On the positive side, the Office of Budget Responsibility are predicting that borrowing will reduce to its lowest level in 20 years and should reach 1.1 per cent of GDP by 2022/23.
On the face of it, there didn’t seem much in the Budget that impacts the property sector, but as is often the case, there was much more in the detail than covered by the chancellor in his speech. A summary of the changes that may impact the property sector follow.
Stamp duty land tax (SDLT)
Perhaps the most newsworthy announcement was the change to SDLT for first-time buyers. From 22 November, there will be no SDLT charge for first-time buyers on the first £300,000 on the purchase of properties costing up to £500,000.
There were also changes announced to the higher SDLT rates, i.e. the three per cent supplement.
Essentially, the new measure grants relief in certain cases, including where:
- a divorce-related court order prevents someone from disposing of their interest in a main residence
- an individual buys property from their spouse or civil partner
- a deputy buys property for a child subject to a Court of Protection order, or
- a purchaser adds to their interest in their current main residence.
It also closes down an avoidance route.
From a business perspective, the change from RPI to CPI when setting business rates will be a much-welcomed change, as well as address the so-called ‘staircase tax’ whereby businesses which operated on more than one floor could be taxed on a valuation that looked at the value for each floor, which was generally greater than the whole. The government is looking to legislate soon to remove this unfairness and bring business rates back to their previous levels.
For firm’s operating through a corporate structure, the chancellor is sticking with his previously announced plan of reducing the rate of corporation tax to 17 per cent by 2020, but he will address the capital gains tax (CGT) allowance that companies can claim in line with inflation, by freezing it from January 2018.
CGT for non-UK residents
For firms that advise non-UK resident individuals and non-UK resident companies that own UK property, from April 2019 all gains on immovable UK property will be brought into charge to tax.
CGT payment window
The introduction of the 30-day payment window between a capital gain arising on a residential property and payment of the tax liability will be deferred until April 2020.
Annual tax on enveloped dwellings (ATED)
The annual chargeable amounts for ATED will be increased by inflation for the 2018/19 chargeable period which begins on 1 April 2018.
For residential properties valued above the threshold of £500,000 up to £1,000,000, which are not eligible for relief, this will increase the annual charge to £3,600. The annual charges for higher value properties are similarly increased.
Mileage allowance for landlords
The introduction of fixed-rate mileage expenses for landlords has been announced with effect from 6 April 2017. This will allow landlords the choice to use fixed rates per business mile to calculate their allowable deductions for motoring expenses, instead of deducting actual running costs and claiming capital allowances. It will not be available to landlords who are companies or in mixed partnerships. The aim of this measure is to simplify tax computations for unincorporated property businesses who choose to use mileage rates.
Steve Roberts is a tax director at Armstrong Watson LLP and is part of Armstrong Watson’s specialist legal sector team. The legal sector team advises law firms throughout the UK on strategic, structural and other business improvement issues as well as providing efficient accounting, tax and SRA accounts rules services. Further information can be found at: www.armstrongwatson.co.uk/legalsector
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