On 25 November the Chancellor delivered the 2015 Autumn Statement. From a real estate perspective, there were a few significant announcements.
Stamp duty land tax (SDLT)
Additional 3% on all bands on "additional" residential properties
From 1 April 2016, higher rates of SDLT will be charged on purchases of buy-to-let properties and second homes. The higher rates will be 3% above the current SDLT rates. The government will consult on whether the higher rates should not apply to companies or funds making significant investments in residential property. It is not clear how the additional rate charge would interact with SDLT multiple dwellings relief.
The policy behind the change is not entirely clear, but it appears to be an attempt to make purchases less attractive for buy-to-let investors and to keep a lid on house prices escalating wildly in London, in much the same way as the mortgage interest relief restrictions. The policy may backfire on the government given that the rise in residential SDLT rates up to 12% has resulted in a slowdown in high value residential transactions, especially in London. Creating a new 15% SDLT rate for overseas buyers could further hurt high value residential sales and lead to developments stalling (with the consequent loss of the social housing they usually provide as a by-product).
14-day filing/payment deadline?
The government is to consult on changes to the SDLT filing and payment process. The proposal is to reduce the payment and filing window from 30 days to 14 days. The change would come into effect in 2017-18 and would clearly affect post-completion processes/timings.
Seeding relief for authorised property funds
A new relief from SDLT will be introduced (likely in summer 2016) for transfers of real estate into Property Authorised Investment Funds and Co-ownership Authorised Contractual Schemes (CoACSs). This relief - which has been on the horizon since 2014 - is likely to apply to portfolios of 100 residential properties (and £100m value) or 10 non-residential properties (and £100m value). There will be an 18-month seeding period, plus a 3-year claw-back mechanism.
In addition, changes to the SDLT treatment of CoACSs investing in property are to be made so SDLT does not arise on transactions in the scheme units. These changes could be of interest to our pension fund clients interested in using PAIFs or CoACS for joint ventures or to fund management clients looking at creating new products to sell.
Additional reliefs for annual tax on enveloped dwellings (ATED) and 15% SDLT rate
From 1 April 2016, additional reliefs from these charges are to be introduced for property development activities and properties occupied by employees.
Capital gains tax (CGT)
From April 2019, any CGT due on the disposal of residential property will have to be paid to HMRC within 30 days. It is not yet clear whether this will apply to each of the UK CGT charge, the 'ATED-related' CGT charge or the new, non-resident CGT charge that applies to residential property.
House building incentives
The Chancellor announced a 'Five Point Plan':
- Delivery of 400,000 affordable houses by 2020-21, including (a) 200,000 starter homes to be sold to first-time buyers at a 20% discount, and (b) 135,000 shared ownership homes delivered under the 'Help to Buy' scheme (for households earning less than £80k outside London and £90k within London).
- Extension of the 'Right to Buy' scheme to housing association tenants. From midnight tonight, a pilot will run with five housing associations, with a view to designing the final scheme.
- Speeding up house building through a variety of measures, including (a) reforming the planning system, (b) releasing public sector land for development of around 160,000 homes, (c) releasing undeveloped commercial/retail/industrial land for starter homes, (d) allowing regeneration of brownfield sites in the green belt, and (e) supporting small and medium-sized house builders by changing planning policy to support small sites and extending the 'Builders' Finance Fund' to 2020-21.
- Extending the Help to Buy equity loan scheme to 2021 and creating a London-specific scheme that will provide a 40% interest-free loan to buyers with a 5% deposit. The loan will be interest-free for 5 years and can be used in conjunction with the Help to Buy ISA, which starts on 1 December 2015.
- Imposing higher rates of SDLT for additional residential properties - see above.
The proposals announced amount to a continuation of the trend towards devolution. In brief:
- The government plans to introduce a further 26 Enterprise Zones (which offer initial business rates relief and enhanced capital allowances for businesses, plus simplified planning regimes).
- By the end of the current Parliament, the stated aim is for councils to retain 100% of their business rates and allow them to cut rates in order to boost growth. Cities with mayors will also be allowed to charge a rates premium in order to fund local infrastructure projects.
- Local authorities should be able to keep 100% of sale proceeds from the sale of surplus assets (including real estate), provided the money is spent on 'reform projects'. The government also intends to publish new guidance on best practice for property disposals by local authorities at or before the 2016 Budget.