The Chancellor Philip Hammond introduced a number of changes relevant to the property sectors yesterday in the Budget 2018.
With a few exceptions, these announcements primarily affect England, Wales and Northern Ireland, but it perhaps provides some indication of what might be said when the Scottish Government publishes its Budget on 12 December 2018. For now, see below for the main changes.
Capital gains tax
Amid concern that principal private residence relief (PPR) is being exploited, the Government has announced a consultation on the reform of lettings relief. The intention is that it should only apply where the owner of the property is also in occupation with tenant.
The ‘final period exemption’ is also changing. The current PPR rules provide that, as long as a house has qualified for PPR at some point in an individual’s ownership, the last 18 months always qualifies from the relief (36 months in the case of disabled persons or those in a care home).
Under plans announced in the Budget, however, the final period exemption will be reduced from 18 months to nine. It is not intended that any changes will be made to the final period exemption available for disabled people or those in care homes.
These changes will be introduced from April 2020.
Capital allowances: structures and buildings allowance
A new 2% capital allowance for new non-residential structures and buildings is to be introduced. This will apply with all contracts for the physical construction works are entered into on or after 29 October 2018. This allows businesses to deduct 2% of the cost of any new non-residential structures and buildings off their profits before they pay tax.
Stamp Duty Land Tax (SDLT): First time buyers
Last year’s Budget saw the introduction SDLT relief for first time buyers in England and Northern Ireland (Wales has since introduced its own Land Transaction Tax). This provided a relief on purchases of property with a price of up to £500,000.
The relief has now been extended so that shared ownership purchasers can benefit from the relief. Previously, the relief had only be available where purchasers had made a market value election. This change will be retrospective so that any buyers can claim a refund where they have made a purchase since 22 November 2017 and would be eligible to claim the relief under the new rules.
Stamp Duty Land Tax (SDLT): foreign investors
The Government has announced plans to consult on the possibility of introducing an additional SDLT charge for non-resident purchasers. This extra charge of 1% would apply on purchases of residential property in England and Northern Ireland.
Rent-a-room relief currently allows individuals to earn up to £7,500 tax-free from letting out furnished accommodation in their home. The Government had consulted on making changes to this relief but has decided not to make any amendments at this time.
Treatment of self-catering and holiday let accommodation
The Government is concerned that some owners of properties are not paying the correct tax. A consultation will be launched on the criteria under which self-catering and holiday lets become chargeable to business rates rather than council tax.
As in previous years, housing plays a prominent role in the Budget, with the Chancellor announcing a new scheme with the British Business Bank to provide SME housebuilders with £1 billion of lending and a new five-year strategy business plan for Homes England.
The Government will also abolish the Housing Revenue Account cap, allowing local authorities in England to increase their house building programmes to 10,000 homes per year. Funding of £10 million will be made available to support strategic housing deals with local authorities in areas where there is a high demand for housing.
The Housing Infrastructure Fund will also increase by £500 million to a total of £5.5 billion, with a view to unlocking up to 650,000 new homes.
A new consultation will be launched on new permitted development rights to allow upwards extensions above properties and to allow commercial buildings to be demolished and replaced with homes.
It is planned that the system of developer contributions will be simplified. The stated aim is to provide more certainty for developers and local authorities while enabling the local areas to share in the uplift in land values.
In order to assist buyers, between April 2021 and March 2023, a new Help-to-Buy scheme will operate for first time buyers purchasing properties up to £600,000 in value (depending on the local area). The Government is also providing £8.5 million of funding to allow 500 parishes to allocate land for homes to be sold at a discount.
Another of the key focuses in the Budget this year was on the struggling high street retail sector.
From April 2019, the Government will provide assistance to commercial operators in England by cutting business rates by one-third for retail properties with a rateable value of less than £51,000. It is predicted this will benefit up to 90% of retail properties. The £1,500 business rates discount for office space occupied by local newspapers will be continued.
The Government is also introducing a £675 million Future High Streets Fund to support local areas in England to develop and fund plans for their high streets and town centres. This will include £55 million for restoring historic high streets and bringing properties back into use as homes, offices and cultural venues.
A consultation on introducing a more ‘responsive’ change-of-use regime has also been announced with the intention of making it easier to establish new mixed-use business models on the high street. A register of empty shops will be trialled with a brokerage service which will look to connect community groups to empty shops.
City and growth deals in Scotland
Amongst the measures which do apply to Scotland, the Chancellor announced a commitment of £150 million to allow the Tay Cities Deal to be agreed. The UK Government also announced its intention to begin negotiations with the Scottish Government towards a Moray Growth Deal and progress those in relation to Ayrshire and the Borders.
Oil and gas
The Government is looking to remove barriers to new investment in the North Sea with the introduction of a transferable tax history mechanism and an amendment to the Petroleum Revenue Tax rules on retained decommissioning costs to simplify the way in which older fields can be sold to new investors. The Government will also launch a call for evidence to identify what more should be done to maintain Scotland’s, and the UK’s, position as a hub for offshore decommissioning.
Abandoned waste site clearance
A pilot scheme will be established to permit the Environment Agency to work with partners to clear abandoned waste sites which are considered to be blighting local communities.
The Government plans to set up a Woodland Carbon Guarantee scheme to support the planting of 10 million trees by purchasing up to £50 million of carbon credits for qualifying tree planting. This is in addition to £10 million of funding for local community street trees and urban trees.
The Government announced that the National Roads Fund will be £28.8 billion between 2020-25, with £25.3 billion earmarked for investment on England’s strategic roads. £420 million will be allocated to local authorities to tackle repairs to minor roads.
Public lavatories relief
Finally, the Government is to introduce a 100% relief from business rates for all public toilets. This will help keep these convenient conveniences open for all wanting to spend a penny.