The Budget is now confirmed for 11 March. Read our briefing to find out what this means for the real estate sector.

We have set out our thoughts on what has already been announced, what we anticipate, and what we would like to see. 

Not all changes are announced on Budget Day, sometimes they emerge on the subsequent publication of legislation. Therefore, also watch out for the Finance Bill (due to be published on 19 March) as it will contain more details of forthcoming tax changes.

We have also set out some previously announced tax changes that will come into effect from April.

  1. Already announced
  2. Expectations
  3. Wish list
  4. Gentle reminder

1. Already announced

Several changes were announced in the general election process and we are expecting to see these confirmed. Click on each of the headings to read more. 

  • Retention of the current 19% corporation tax rate.

    This will require a reversal of the law which currently has the rate reducing to 17% for the financial year from 1 April 2020. Notably, this change will also affect non-resident corporate landlords (NRCLs), who will come into the UK corporation tax net from 6 April. While the headline rate itself is only marginally different from the current 20% income tax rate, potentially, for many NRCLs (eg those with debt funding) the change of regime could have substantially wider implications meaning a higher effective rate of tax than at present.

  • 3% additional SDLT surcharge on purchases of residential property by non-residents.

    This means a new effective top rate of 18% for purchases of dwellings by non-UK residents. Query whether we will see any exemptions for those in the BtR sector or whether, in practice, institutional and other investors acquiring portfolios will need to rely on commercial rates to avoid the new more penal charge going forward. See below for further information.

  • Changes to "IR 35"

    This change is relevant to the many businesses in the sector who use consultants and other providers through personal service companies (PSCs). The change will move the obligation to account for PAYE and NIC obligations from the PSC to client (or other fee payer), should the role be deemed to be one of employment for tax purposes. Helpfully, there has been clarification that it only applies to services supplied after 6 April 2020. HMRC have recently confirmed that clients that are "wholly overseas" with no UK presence will be excluded from the new off-payroll working regime – PSCs working for such organisations will have to apply the existing IR35 rules. We will have to wait until the Finance Bill is published on 19 March to see the detail of this exclusion. HMRC have also stated that they will take a light touch approach to penalties in 2020/21. While many are now well prepared, those who have not yet been taking appropriate action have not long now to get ready. See below for further information.

  • Increase in Structures and Buildings Allowance (SBAs)

    This applies to certain commercial property from 2% to 3% per annum. Notably, these do not apply to residential property, serviced apartments or care homes, which, given the need for more expenditure in this area, is a bit of a shame. (One for the wish list). Where applicable, these allowances may benefit NCRLs looking to offset potentially increased tax costs as a result of coming within the corporation tax regime. The allowances are however ultimately only a cash flow benefit as, if the property is later sold, the allowances claimed are added to the disposal consideration.

  • Non-resident Corporate Landlords

    (See also retention of the current 19% corporation tax rate above). Already on the statute book, it seems that the implications of this apparently innocuous change are widely underestimated. As indicated above, the move does not just mean a change from income tax at 20% to corporation tax at 19%. The effect of the change will be, potentially, to bring NRCLs into a host of anti-avoidance and BEPS driven initiatives (e.g. through new restrictions on tax deductions for interest and hybrids and certain brought forward losses), that could impact on anticipated returns and commercial positions, with implications for the viability of existing structures for some. See below for further information.

  • VAT exemption on fund management fees for certain UK REITS from 1 April.

    This follows on from an EU case, Fiscale Eenheid X, which deemed supplies of fund management to certain collective investment schemes (including those holding real estate) to be VAT exempt. While, to date, HMRC have allowed certain listed funds, which met the conditions of the case to decide voluntarily whether or not to apply exemption, they have stated that regulations will be introduced to make the exemption mandatory from 1 April 2020. How much changes in practice may depend on the precise drafting of the new regulations. Those potentially affected e.g. fund managers and REITs will be considering the issue with care.

  • Final Period Exemption from Private Residence Relief (PRR) to be reduced and PRR lettings relief to be restricted.

    PRR is available as a relief from CGT on disposal of a property which has been occupied by an individual as their only or main residence. Provided such property was at some point occupied as the individual's main residence, the current PRR rules also provide for a "final period exemption", which enables the individual to treat their final 18 months of owning a property (regardless of whether the individual was living there during this time) as a period in which it was their main residence. This relief is to assist those who move home but are unable to sell their old property immediately. In the Autumn Budget 2018, it was announced that the final period exemption would be cut from 18 months to 9 months, with effect from 6 April 2020. Notably the period used to be 3 years and many are not aware of the current 18 month reduction – never mind the new 9 month one. The period will remain 36 months for individuals who are disabled or resident in a care home. PRR lettings relief provides CGT relief to an individual, up to a cap of £40,000, if the property was occupied at some point as the owner's main residence and a gain was made during a period in which the property was occupied by a tenant. In the Autumn Budget 2018, it was announced that lettings relief would be restricted so it will only apply where the owner is in shared-occupancy with the tenant with effect from 6 April 2020. The change will affect tenancies that began before 6 April 2020 and means that, where the owner is not living in the property, no lettings relief will be available beyond the period for which the property qualifies for PPR. There are some other changes to PRR also (which are outside the scope of this briefing).

  • Reverse charge for VAT on certain construction services

    Previously announced. This has been postponed to October 2020, but the changes are far reaching and now fast approaching. See below for further information.

  • Reduction in period for payment of CGT on residential property for UK individuals and trusts to 30 days

    In line with the introduction of non-resident CGT (NRCGT), this markedly shortens the filing and tax payment date for gains on UK residential property to 30 days from the date of completion. The current position potentially gives rise to a 21 month delay in that filling and tax payment is not required until 31 January following the end of the relevant tax year of the disposal. This will be a big cash flow disadvantage for many and interest and penalties will arise for non-compliance. Helpfully, there are certain exemptions, such as where the gain is covered by PRR or prior capital losses, but these should be considered on the facts. The new filing and payment date will not apply to UK companies.

2. Expectations

So what else may be in the Budget?

It was confirmed, in the election process, that the triple lock on pensions would remain and that there would be no tax rises on VAT or NIC. However, the government still needs to find extra funding to balance its books by 2023, if they stick to what had been the policy of the previous Chancellor. On the other hand the new Chancellor has talked of "levelling up", which is likely to mean we get more expenditure on infrastructure and other capital projects around the country. This will be watched with interest by those looking to invest in the UK, for example, if they are deciding where to build more housing. However, raising the cash for this is likely to put other areas into the firing line for tax rises which could include:


  • Reduction in the extent of Entrepreneurs Relief. As yet, there are no firm proposals and the Government appears to be wavering under pressure from owner-managed businesses, but shareholders in qualifying companies and business owners will remain concerned about the potential withdrawal of, or reduction in, the relief.  
  • Changes to pension tax relief – in particular, this is being watched carefully by additional rate taxpayers and those currently claiming more than 20% tax relief on contributions, both of which look vulnerable.  
  • Radical reform of inheritance tax (IHT), with a consultation now under way. In their guest editorial briefing, Stevens & Bolton examine the proposed changes to inheritance tax.  
  • Something around more expensive housing. While a "mansion tax" may be widely divisive, something like a new council rate band may be more generally palatable (at least to Conservative voters and those with property in London).

3. Wish list

  • Tax reliefs to assist the environment, sustainability, climate change and zero carbon agendas. These topics are high up many peoples' and CEOs' lists of concerns, but implementation comes at a cost to business.  It would be helpful to see tax (now in the form of enhanced reliefs) being used as a tool to encourage good behaviour in this area - and sooner rather than later.  These reliefs could include: - reduced or zero SDLT on a top EPC rating; - new capital allowances – including maybe extending SBAs for certain carbon neutral expenditure or energy efficient expenditure in the residential sector; and - zero-rating of VAT for appropriate expenditure e.g. on refurbishment to make buildings more sustainable. If zero-rating proves too expensive (which was what proved to be the case when this was previously mooted by the industry for general repairs and maintenance) perhaps (now we have left the EU) a lower 5% rate could be considered. This issue is ever more important as housing targets are still a long way from being met and VAT reliefs may impact positively on viability and in speeding up delivery of homes. No doubt the industry would be happy to provide suitable costings to assist with the relevant cost benefits analysis. Partner Russell Warren discusses the way in which the tax regime could help combat climate change in this briefing.


  • A new form of professional investor fund structure - neither listed nor heavily regulated, which could be used to meet the needs of more sophisticated investors for whom UK's existing range of fund structures do not provide a complete solution. Perhaps we could see something that looks like an unregulated contractual scheme - that in practice would, in a real estate context serve to deliver something like an old form JPUT but onshore (though not adopting a trust structure). The Investment Association is working with Association of Real Estate Funds (AREF) on this already, so some announcement following Brexit would be good for the industry.  
  • At a more granular level, the industry has been lobbying for some time for an exemption from the construction industry scheme for landlords' contributions to tenants carrying out landlords' (not tenants') works and for the ability to make CIS group certifications.

4. Gentle reminder

  • NRCGT: election deadline of 5 April 2020 for pre-April 2019 offshore income transparent funds, such as JPUTs and FCPs, that wish to elect for CGT treatment as partnerships. Both transparency and exemption elections for collective investment vehicles and qualifying companies (where appropriate) can now be made online.  
  • Expansion of registration of beneficial ownership register for offshore companies from 2021.  
  • Expansion of registration of for ownership of trusts (onshore and offshore) – currently under consultation.  
  • Further progress towards the implementation of BEPS Pillar Two - which proposes a uniform minimum rate of tax but potentially cuts across exemptions from tax given to certain funds in many jurisdictions.  
  • DAC 6 – rules applying in the UK and EU wide in relation to the disclosure of cross-border arrangements. Already in law, filings will be required in Summer 2020 for reportable transactions from 25 June 2018.