In his first Budget as Chancellor, Rishi Sunak focused on the UK's economic response to coronavirus COVID-19 and increases in public spending. There were limited changes from a Real Estate perspective, with the following highlights:
Structures and buildings allowance increases to 3%
The rate of structures and buildings allowance (SBAs), a form of capital allowance for costs incurred in the construction or renovation of commercial property, will be increased to 3% from 1 April 2020. Broadly, SBAs are available over a 50-year period on new commercial property where expenditure was incurred, and works began, on or after 29 October 2018.
2% SDLT surcharge for non-UK residents buying residential property from April 2021
A 2% SDLT surcharge on non-residents buying residential property in England and Northern Ireland will be introduced to take effect from 1 April 2021. This will be in addition to the 3% surcharge for individuals purchasing second homes and companies buying residential property, increasing the highest rate of SDLT on residential property to 17%.
Business rates 'holiday' for retail, leisure and hospitality sectors
The Chancellor announced that the current 50% business rates retail discount, which applies to shops, restaurants, cinemas and live music venues with a rateable value of less than £51,000, will be increased to 100% and expanded to include hospitality and leisure businesses (including small hotels/B&Bs, sports clubs and gyms) for the next financial year.
In addition, the Government will undertake a fundamental review of the business rates regime, reporting in autumn 2020, which will consider reforms to the current business rates system, its administration and alternatives to business rates. Other changes
The Chancellor made a number of other announcements impacting the real estate sector:
- The Government will undertake a review of the funds regime during the course of 2020, including a consultation on the UK tax treatment of real estate, private equity and credit fund structures, along with a review of VAT on fund management fees.
- As previously announced, the VAT reverse charge for building and construction services will come into effect from 1 October 2020. This measure shifts the responsibility for accounting for VAT on construction services from the supplier to the customer in certain circumstances, requiring the customer to account for VAT directly to HMRC.
- Reliefs from ATED and the flat 15% rate of SDLT on purchases of dwellings over £500,000 will be introduced for qualifying housing cooperatives, with the SDLT relief taking effect from Autumn Budget 2020 and the ATED relief from 1 April 2021.
- The Government has confirmed it will legislate to prevent non-compliant businesses from using the Construction Industry Scheme to claim illegitimate tax refunds, and a consultation will also be published in due course on promoting supply chain due diligence.