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Construction & Real Estate Community

Autumn Budget 2021 overview

Author: Ros Rowe, Subject Matter Expect for the Construction & Real Estate Community and Non-Executive Director, B3 Living Limited

Published: 16 Nov 2021

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Ros Rowe provides an overview of changes announced in the UK Autumn 2021 Budget.

The Government practice for the Budget has evolved into a multi-step process. First, there are pre-Budget messages about tax changes, for example the increase in national insurance. Then follows the ritual announcement by the Chancellor to Parliament, with statements, consultations and explanatory notes published that day on the Treasury and Government publications websites. About a week later,  draft legislation is issued in the Finance Bill, which reflects the contents of the Chancellor’s Budget announcements and provides technical modifications to existing law, while occasionally something new may appear. The draft legislation in the Finance Bill that can change Royal Assent is obtained when the final version of the Finance Bill becomes a Finance Act. If you want to track the progress of the current Finance Bill – labelled Finance (No.2) Bill – through Parliament, then use this link:

Tax measures

Here’s an overview of tax changes announced by the Chancellor which could affect members of the real estate community.

1. Residential Property Developer Tax (RPDT) – announced in February 2021, the tax will be 4% of profits exceeding £25m which are generated through UK residential property development with the proceeds to be applied to funding building safety remediation. A complex regime, more information about Government Policy, including why Build to Rent is excluded, is available.

2. Payment window for capital gains tax (CGT) on property disposals – from Budget Day (27 October 2021) the deadline for resident and non-resident taxpayers to report and pay tax is extended from 30 days to 60 days. Where the property is mixed use, the 60-day payment window applies only to the residential element.

3. Business rates review – the Government has published the Business Rates Review – Final Report which proposed a reduction in charges combined with more frequent valuations. The changes are:

  • From 1 April 2022 to 31 March 2023, the multipliers (the rate applied to rateable value to calculate business rates) are frozen at 49.9p and 51.2p
  • A temporary business rate relief in 2022-23 for eligible retail, hospitality and leisure properties set at 50% up to £110,000 per business cap
  • There will be improvement relief of 100% for one year where improvements to an existing property increase the rateable value; there are consultations on how this relief could work. It will be effective in 2023 and reviewed in 2028
  • From 1 April 2023 until 31 March 2035, there will be ‘targeted’ business rate exemptions for eligible plant and machinery used in ‘onsite renewable energy generation and storage’ and 100% relief for eligible heat networks – supporting decarbonisation of non-domestic buildings
  • From 2023, revaluations will take place every three years (currently five years), together with additional funding for the Valuation Office Agency
  • There will be transitional relief for small and medium sized companies and the small business scheme for one year. Bill increases will be restricted to 15% for small businesses (up to £20,000 or £28,000 in Greater London) and 25% for medium properties (up to a rateable value of £100,000) subject to subsidy control limits
  • English local authorities will be compensated for the loss of income (see published letter) plus they will receive additional funding for IT and new burdens costs relating to implementing these changes. Devolved Administrations will receive block grants in the usual way
  • Linked to these changes is a possible online sales tax where the revenue raised could offset the lost income to the government – a consultation is awaited

4. Corporation tax changes are as follows:

  • The corporation tax rate will increase to 25% on profits over £250,000 from 1 April 2023, with taper relief for profits between £50,000 and £250,000
  • Research and development relief will be reformed following a consultation. The relief will be extended to data and cloud costs, with a focus on targeting innovation while also combating abuse. New legislation will apply from 1 April 2023, with more information due this Autumn
  • The annual investment allowance (currently available on qualifying expenditure up to £1m) will also be available up to 31 March 2023 to encourage further investment
  • Cross border group relief will be abolished from 27 October 2021
  • The Government intends to enable companies to re-domicile to the UK, and also from the UK to other territories; they are consulting on how best to achieve this
  • From 1 April 2022, large businesses will be required to report to HMRC where a return for VAT, corporation tax or income tax (including PAYE) includes an item where the taxpayer is uncertain – either a provision has been taken in the accounts because of the uncertainty or the tax treatment conflicts with HMRC’s interpretation as expressed in public or in dealings with HMRC. Notification is required where the tax advantage is over £5m in a 12-month period.

5. Investment funds and property companies: 

  • There is to be a new taxation framework for investment by funds and institutional organisations (Asset Holding Companies – AHCs) which will also address the payments made to investors. Further information can be accessed here. https://www.gov.uk/government/publications/new-tax-regime-for-asset-holding-companies-ahcs/new-tax-regime-for-asset-holding-companies-ahcs
  • There will also be changes to certain tax provisions for Real Estate Investment Trusts (REITs)
  • The UK funds regime is to be reviewed, including a consultation on ways to simplify the VAT regime on fund management fees

6. Aggregates levy – the rate will be frozen for 2022-23 but will be subject to index-linking in future

7. Changes to the taxation of individuals and unincorporated businesses include:

  • The new Health and Social Care levy of 1.25% will apply UK wide from 6 April 2022 to the same population as Class 1 (Employer, Employee) and Class 4 (Self-Employed) national insurance contributions (NICs), and to the main and additional rates but not Class 2 and Class 3. From 6 April 2023, the levy will also apply to the income of working individuals above State Pension age when NICs will return to their usual rate and the Health and Social Care Levy will be separately applied
  • The Government will use the September 2021 CPI figure of 3.1% to uprate NIC limits and thresholds, plus the rate of Class 2 and Class 3 NICs for 2022-23
  • The calculation of income tax will be simplified from the tax year 2024-2025 for individuals trading as self-employed or in partnerships, non-resident traders, trading trusts and estates. They will be required to calculate tax based on profits earned in the tax year (currently they would use profits reported in the accounts which are adjusted for both early years of trading, and cessation of business). The transition to these new provisions will apply in 2023-2024
  • Sole traders and landlords with income over £10,000 will need to comply with Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) from 6 April 2024 and general partnerships will be subject to this regime from 6 April 2025
  • A new regime of penalties was announced in September 2021, in relation to the VAT and ITSA regimes which will apply for late submission of returns and payment of tax, with effect from 6 April 2024 for sole traders and landlords, and from 6 April 2025 for everyone else
  • As previously announced, the rate of income tax on dividends received by individuals throughout the UK will increase by 1.25% from 6 April 2022. The dividend rates will be: ordinary dividend rate – 8.75%; the upper dividend rate – 33.75%; and the additional dividend rate and dividend trust rate – 39.35%
  • The Government will introduce regulations to enable Ministers to take decisions to provide income tax and NIC reliefs on specific expenses or benefits-in-kind in the event of a disaster or emergency of ‘national significance’ (currently the Government is legislating in Spring 2022 that payments under the Household Support Fund and equivalent initiatives in the devolved administrations are not taxable)

8. Further measures against promoters of tax avoidance are to be introduced effective from Royal Assent:

  • Freezing of promoters’ assets to enable penalties to be paid
  • Deterring offshore promoters by levying a penalty on UK entities that support them
  • Closing companies or partnerships that promote schemes
  • Sharing more information about promoters and schemes to enable taxpayers to keep away from schemes

9. Tax administration and maintenance – further announcements are to be made

Non-tax measures

There were announcements in the Budget which are not tax-related, but which could have an impact on the property sector:

1. Recovery loan scheme – this will be extended until June 2022 to enable lenders to continue to lend funds to small and medium-sized businesses. The finance provided can be up to £2m per business; the Government guarantee will reduce from 80% to 70%.

2. Housing – the Chancellor referred to an £11.5bn investment in an Affordable Homes Programme to deliver 180,000 new homes between 2021 and 2026 but that had been previously announced in 2020. Similarly, £5bn set aside to remediate cladding defects was announced in April 2021. The reference to £800m set aside for the Social Housing Decarbonisation Fund first appeared in the Heat and Buildings Strategy earlier in October 2021.

3. Driving growth across the UK – the Government has highlighted the following: 

  • There has been a Government review of the National Infrastructure Commission (NIC) fiscal remit, which is now revised. The NIC must make recommendations on public sector investment in economic infrastructure in the range 1.1% to 1.3% of GDP each year from 2025 to 2055
  • The Government is to commission an NIC study of surface water flooding with a report, back by November 2022, on potential traditional and nature-based solutions
  • Further to the announcements of 8 Freeports in Spring 2021, three sites at Humber, Teesside and Thames will begin initial operations from November 2021. Additional guidance may be offered to businesses claiming Freeport relief, if issues emerge from discussions between the EU and UK about the Northern Ireland Protocol

4. Initiatives to increase the number of people available for employment – initiatives include:

  • A new Scale-Up Visa to be launched in Spring 2022, which will be open to individuals who pass a language proficiency test and have a job offer from an eligible business with a salary of at least £33,000
  • The launch of a Global Talent Network to attract people to the UK’s science and technology sectors from campuses, research institutions and innovation hubs. There will be a concierge service helping people relocating to the UK. The initiative will launch in the Bay Area and Boston, in the US, and Begaluru in India, and will complement the expanded Department for International Trade Global Entrepreneur Programme.

5. Reform to the national living wage and welfare:

  • Following the recommendations of the Low Pay Commission, the National Living Wage for individuals aged 23 and over will rise from £8.91 to £9.50 an hour from 1 April 2022. National Minimum Wage rates are also increasing
  • The taper rate for Universal Credit for those in work is reducing from 63% to 55% from 1 December 2021
*The views expressed are the author’s and not ICAEW’s.
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