Private Residence Relief from Capital Gains Tax (PRR)
The Chancellor announced that the automatically exempt final period of ownership for properties that have been at any time a qualifying private residence will be reduced to 9 months from April 2020. It is currently 18 months, which itself was the result of a reduction from 36 months in April 2014.In addition, the availability of the lettings exemption that can provide up to an additional £40,000 of PRR per person will be restricted quite sharply. In future this will only apply to private residence disposals where the owner is in shared occupancy with a tenant. This is likely to block a claim for lettings exemption from all but a handful of disposals. Currently any disposal of a property qualifying for PRR where the property in question has also been let during its lifetime would qualify.
Structures and Buildings Allowance (SBA)
The Chancellor has introduced a new allowance - the SBA. It feels very similar to the defunct Industrial Buildings Allowance that were phased out between 2008 and 2011.The SBA will provide both corporation tax and income tax payers with an allowance of 2% per annum against the original construction expenditure incurred on buildings and structures provided that they are not used wholly or mainly as dwellings.
SBA is introduced with immediate effect for eligible expenditure incurred on new contracts after 29th October 2018 even though HMRC recognises that further consultation will be required in a number of important areas before the actual legislation can be introduced.
Capital Allowances - Special Rate Reduction
The Chancellor announced that the special rate of capital allowances will reduce from 8% per annum to 6%. The special rate applies to a number of asset classes including “Integral Features” of qualifying buildings.It is worth noting that the new SBA will offset this for people in the property sector and the Treasury’s impact assessment suggests there should be a net cost to the government (and thus a net gain to taxpayers).
Enhanced Capital Allowances (ECAs)
ECAs were introduced almost 20 years ago to support investment in energy saving technology. They have been a big success and have seen increasing take-up over time in particular as the technologies included within the scheme have been extended. Indeed the Budget continued that theme by, as expected, updating the list of qualifying technology once again.However it was also announced that ECAs will be withdrawn entirely from April 2020.
Non-UK Resident Landlord Companies - Corporation Tax
As previously announced, it was confirmed that non-UK resident companies with UK property income will from 6th April 2020 be chargeable to corporation tax rather than income tax. This is intended to level the playing field between onshore and offshore companies.Unfortunately, as enhanced capital allowances are being abolished on the same day as this is introduced, the previously unavailable tax credit associated with this incentive will remain out of reach.
SDLT – Improvements for Shared Ownership
First-time buyers purchasing shared equity homes of up to £500,000 will be exempt from stamp duty effective from 29 October 2018. This measure is retrospective (up to 22 November 2017) and therefore any first-time buyers in this position will be able to claim a refund.SDLT – Surcharge for Non-Residents
The government is to consult on a surcharge of 1% for non-residents buying residential property in the UK.Business Rates
For self-catering and holiday let accommodation, the government will be consulting on when these will become chargeable to business rates rather than council tax. The government has said that this is to ensure second properties are subject to the correct tax and are not falsely advertised as “available to let”.Investment
The Chancellor announced a £500million investment in the Housing Infrastructure Fund which it is hoped will result in 650,000 new homes and brings the total investment value to £5.5billion.To help regenerate high streets, the Chancellor also announced a Future High Streets Fund of £675million. This will allow local areas to develop their high streets and make them fit for the future.
Raffingers are specialist accountants for the property sector. For further advice on any of the Budget announcements and how they may affect you, contact Barry Soraff at barry.soraff@raffingers.co.uk.