Following the Chancellor’s Spring Budget 2017 update, Menzies Property & Construction sector team have reviewed the impact of Philip Hammond’s announcement upon the UK property and construction business community.
Comments provided by Rebecca Wilkinson.
With the Government’s Housing White Paper still hot off the press it is perhaps unsurprising that there were no new announcements affecting either property developers or investors in the Spring Budget 2017 update. Many SME property developers were hoping for some kind of relief from the punitive 3% stamp duty land tax (“SDLT”) surcharge, which would help reduce the cost of acquiring residential sites for development. Disappointingly however, no such relief has been granted. Other property professionals were championing a decrease in SDLT on houses worth more than £1 million in order to boost stalling house sales at this end of the market and free up property down the chain, but this did not happen either. It seems for the time being that high SDLT rates are here to stay.
Buy-to-let landlords will also be disappointed that the new interest restriction rules, which are due to be phased in from next month, are not going to be relaxed. The new rules, which could see landlords paying tax on loss making property portfolios, are hugely unpopular and it is feared that the worst affected may be forced to sell properties, forcing tenants to find alternative accommodation.
The only good news for landlords came in the form of changes to the proposed Making Tax Digital (“MTD”) legislation. It had previously been feared that any landlord with gross annual rental income of £10,000 or more would fall within the MTD regime, which requires quarterly reporting to HMRC, in April 2018. However, it has now been announced that unincorporated businesses and landlords with turnover below the VAT registration threshold (currently £83,000) will not be required to comply with MTD until April 2019, giving an additional year to prepare. Furthermore, landlords with gross income of below £150,000 can now opt to calculate their taxable profit on a cash rather than an accruals basis of accounting. This should help to simplify the tax affairs of many buy-to-let landlords.
There was also some good news for businesses occupying commercial property. The Government has announced that a fund of £435 million will be made available to support businesses affected by the business rates relief revaluation. This fund will be used to ensure that any business coming out of small business rates relief will pay no more than £600 in additional business rates in 2017-18 than they did in 2016-17. Local authorities will also have a discretionary fund to provide additional help to businesses most affected by the revaluation. Business rates are one of the largest overheads for any business occupying property and can equate to 50% of annual rent. Any relief from increasing rates is welcome but these measures will have little impact on many larger businesses.
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