Budget 2018: Property Tax
Further business rates relief measures were directed at the retail sector, but only for smaller businesses. There is no help for the larger retailers struggling with the general downturn in that sector. Developers may see a cooling-off of demand for newly constructed residential properties, with a suggestion of a further 1% applicable to non-resident purchasers on top of the 3% surcharge introduced for many in 2016.
Other measures relevant to the property sector covered elsewhere in this update include an increase in the Annual Investment Allowance from £200,000 to £1 million per year; changing the burden of charging VAT on the provision of certain services in the construction sector from the sub-contractors to contractors; and the introduction of the off-payroll working rules to the private sector from April 2020.
Small business rates relief and future high street fund
The Chancellor confirmed the rates relief for small retailers announced over the weekend. An estimated 496,000 small business owners (whose property has a rateable value of £51,000 or less) will get a reduction of up to 33% on their rates bill for two years starting in April 2019.
Local authorities are going to be able to apply for funds from a £650 million fund to rejuvenate their high streets. Funding can be used to improve transport links and bring historic buildings back into use. The government’s objective is to facilitate the reinvention of high streets and this measure is being bought in with a commitment to ease the planning rules to allow home and office building on empty high street sites, which should also assist in achieving this aim.
This is welcome news for the struggling high street but it is only a short-term reduction and does nothing to help larger chains. Individual retailers should use this window of opportunity to review their business model in light of the changes in consumer behaviour and invest in making changes required for their business to survive in the long term.
Stamp duty land tax for first-time buyers
This relief is to be extended to first time buyers purchasing through approved shared ownership schemes that choose to pay the stamp duty land tax (SDLT) in stages rather than on the market value of the property on acquisition, and given retroactive effect from 22 November 2017.
The retrospective extension to the SDLT relief originally announced at Budget 2017 will be a welcome relief for many. It must be asked why the application of the relief to approved shared ownership schemes where the buyer elects to pay the SDLT in stages was not put in place originally, particularly as shared ownership schemes are a significant feature in the first time buyer market. In addition one must question whether the change goes far enough and why it does not apply to ‘stair-casing’ but rather only the initial transaction between the developer and the first time buyer.
Overseas purchases of UK residential property
The government will also consult in January 2019 on the possible levy of an additional 1% SDLT on foreign buyers of UK residential property.
The suggestion of a consultation to penalise overseas buyers is likely to be highly contentious and of particular concern to developers of super prime London properties.