As part of the recent budget, the Chancellor announced a £400 million fund designed to stimulate housing development and boost capacity. It is intended that, in England, this fund will deliver up to 10,000 new homes by unlocking stalled development. In addition, the Chancellor announced £100 million funding for local authorities for the construction of new homes at higher energy efficiency standards.
Following the enactment of the Housing and Regeneration Act 2008 last October, it will be open to profit-making companies to register as “profit-making registered housing providers”. The budget announces various changes to SDLT reliefs to bring the regime for profit making registered housing providers in line with those transactions currently involving registered social landlords (RSLs). The proposed changes include:
- A widening of the relief for acquisitions funded by public subsidy to include acquisitions by profit-making registered housing providers.
- Relief for individual purchasers under shared ownership schemes operated by profit-making registered housing providers where the scheme is assisted by public subsidy.
- A simplification of the SDLT treatment of acquisitions under the ‘Rent to HomeBuy’ scheme.
A number of charitable RSLs make use of trading subsidiaries and therefore a number of other announcements in the budget report may also be of relevance:
- The main rate of corporation tax will remain at 28% and the increase in the small companies rate (from 21% to 22%) will be deferred until 1 April 2010.
- There will be a temporary increase in first year capital allowances (from 20% to 40%) for qualifying expenditure on general plant and machinery incurred between April 2009 and April 2010.
- Changes to the loan relationships rules mean that a debtor company will no longer be subject to tax on a release of debt between connected companies and also that the late interest rules will not apply to connected companies unless the creditor company is resident in a ‘non-qualifying territory’ (i.e. a tax haven). This means that interest payments will be accounted for on an ‘accrued basis’ rather than on a ‘paid basis’.
- The Finance Bill 2009 will extend the period (announced as part of the Pre-Budget Report 2008) during which trading losses may be carried back against previous profits in the previous three years. Subject to a £50,000 annual limit on the amount of losses which may be carried back past the preceding year, it will now be possible to carry back trading losses incurred during accounting periods ending between 24 November 2008 and 23 November 2010 (or the tax years 2008/09 and 2009/10) for up to three years.
- Changes to the rules regarding capital gains means that it will be easier for groups of companies to transfer gains or losses within the group. Restrictions regarding the type of asset and the circumstances under which the gain or loss arises will no longer apply.
- Anti-forestalling legislation was announced to prevent businesses advancing the taxpoint of supplies made in order to take advantage of the 15% rate of VAT before the rate reverts to 17.5% on 1 January 2010.
The budget report also announced an increase in the limits under the substantial donor rules. From 23 April 2009, a person will only be a substantial donor in relation to a particular charity if that person, whether an individual or a company, donates more than £150,000 in a six year period, or £25,000 in a 12 month period, to the charity concerned. Any transactions which take place between a charity and a substantial donor other than on arm’s length terms can result in a restriction of tax exemptions or reliefs granted to the charity.
There is an exemption for the substantial donor rules for donations by wholly owned subsidiary companies to their charitable parent companies and this remains unchanged by the budget. The exemption for donations made between RSLs and charities with which they are connected is also unaffected by the budget, however, the changes to be introduced by the Housing and Regeneration Act 2008 suggest that, in future, this exemption will only be available to non profit-making registered housing providers.
Finally, the government intends to conduct further informal consultation on proposals originally announced in July 2008 to develop new rules for substantial donors based around an effective anti-avoidance purpose test. The government hopes to put forward further proposals at the 2009 pre-budget report with a view to legislating in 2010. Whilst the delay in introducing these new rules is a source of frustration for some commentators, it is hoped that the introduction of a new motive test will encourage genuine donors and ease the administration burden of charities whilst preventing abuse.