With the exception of some measures aimed to address the glaring gap between the Government targets for new homes and the reality of a housing industry in crisis, there is little in the budget to give spring cheer to the property industry.
Real Estate Investment Trusts (REITs)
- A REIT is a property rental company which is effectively treated as transparent for tax purposes, so that only the shareholders and not the company are subject to tax. One condition is that its property is not owner-occupied. It must be let to third parties. Apparently some groups of companies have been exploring structures under which properties are let from one group company to another but the REIT conditions are still met. Legislation will be introduced to exclude such arrangements.
- Some other amendments to the REIT legislation are being made “to make the existing legislation clearer and more consistent following discussions with the industry”. For example a REIT will now be permitted to issue convertible preference shares.
Stamp duty land tax (SDLT)
- The SDLT “holiday” for houses worth up to £175,000 has been extended to the end of the year.
- Legislation is being introduced to exempt from SDLT transfers of land in connection with the issue of sukuk (alternative finance investment bonds).
- The exemption for registered social landlords (RSLs) is being extended to Registered Providers of Social Housing who are funded by public subsidy.
- The SDLT treatment of Rent to HomeBuy schemes is being simplified.
- Relief will be given for leaseholders who group together to buy their freehold.
- HM Revenue and Customs have issued a consultation document on the proposal to require the disclosure of SDLT avoidance schemes for residential property valued at £1 million or more.
Other measures affecting real estate
- The mortgage support scheme, under which participating lenders receive a Government guarantee against defaulting homeowners, has been extended for a further six months.
- A further £600 million will be spent on housing supply. £400 million of this is likely to be administered by the Homes and Communities Agency to unlock stalled housing developments. £100 million is to be earmarked for local authorities for new social housing at higher energy-efficient standards. The remainder is to be allocated to other gap/infrastructure funding, an extension of HomeBuy Direct (the Government’s shared equity mortgage scheme) and increased funding for affordable housing.
- The introduction of the Community Infrastructure Levy (CIL) is to be “delayed” until April 2010. In practice, it was never going to be introduced before then and local planning authorities are unlikely to be in a position to implement the levy until much later.
- The Government is to look more seriously at the scope for accelerating development by allowing investment in infrastructure to be financed from a projected increased property tax base (tax increment financing). This is to be welcomed.
- We await the 2009 Pre-Budget Report, due later in the year, which is promised to include:
- an update on measures to deal with ensuring sufficient land for development;
- delivery and effective co-ordination of infrastructure;
- the promotion of a strong and diverse housing sector;
- ensuring a long-term supply of social and affordable housing; and
- a proportionate approach to land value capture and cumulative regulation.
- The ability already given to businesses to spread the 2009 business rate increases over three years has been extended to those adversely affected by the 2005 transitional relief scheme coming to an end.
- A Government consultation is to be launched on measures to help companies in financial difficulties. In addition, the Insolvency Service is to publish regular reports on the monitoring of pre-pack sales, following concern about creditors being unfairly treated through the abuse of pre-pack sales.
- An extension of the climate levy exemption for indirect sales of electricity from combined heat and power (CHP) schemes already exists to 2013; this has now been extended to 2023.
- There are proposals to bring forward investment to promote further CHP capacity.
- The Government is planning £16 billion of Government property sales by 2012 and forecasts further multi-billion-pounds’ worth of savings across the Government estate.