Rebecca Wilkinson – Property & Construction Specialist
Against the backdrop of Brexit and Coronavirus, there weren’t many surprises for the property and construction sector in the March 2020 Budget.
The main focus was on public spending, especially on infrastructure and housing projects, with the following schemes (among others) being announced:
- A £27 billion fund for improving England’s strategic roads;
- £20 million to develop the Midlands Rail Hub;
- Over £1 billion from the Transforming Cities Fund which will be allocated to improving various city centre infrastructure projects;
- A £500 million per year pothole fund from 2020-21 to 2024-25;
- An additional £9.5 million for the Affordable Homes Programme and,
- A new £400 million brownfield fund which aims to increase housing supply on brownfield sites.
Increased investment in home building and infrastructure will bring welcome opportunities for the construction sector. However, with growing concerns over a skills gap in the industry, the Government will need to ensure that access to appropriately skilled workers is maintained, both during the Brexit transition period and beyond, in order to ensure contractors have sufficient resource to see projects through.
The announcement on the reduction in the lifetime limit for Entrepreneur’s Relief from £10 million to £1 million had been anticipated by many. However smaller scale property developers, who are often able to take advantage of this relief on the completion of individual development projects, will be disappointed that the limit has been reduced. Successful property developers will reach the £1 million limit fairly quickly and will now have to pay double the rate of Capital Gains Tax on profits extracted through liquidating their development companies.
SDLT threshold increase
In the residential property market, many were hoping that SDLT thresholds would be increased in order to get sales of the most expensive homes moving. Instead an additional 2% surcharge was announced for purchases of homes by overseas individuals and companies. This will potentially mean a top rate of SDLT of 20% for an overseas resident buying property in England, once the rules come into force in 2021. The additional tax should disincentivise overseas residents from buying UK homes and should be welcomed by UK purchasers as it will reduce competition for homes.
Structures and Buildings Allowance (SBA)
Finally, one unexpected announcement was an increase in the Structures and Buildings Allowance (SBA) from 2% per annum to 3% per annum. The SBA is a form of capital allowance that provides relief for qualifying capital expenditure on new buildings and structures, or on the renovation of old ones. The increase from 2% to 3% is welcome, but is unlikely to have a significant impact on those that are able to claim it.
To discuss any of the above or the implications of Budget 2020 on you or your property & construction business, please contact your Menzies Relationship Partner.