2014 Autumn Statement: key property announcements | Practical Law
On 3 December 2014, the Chancellor of the Exchequer, George Osborne, delivered the Autumn Statement. This update summarises the key property implications.
On 3 December 2014, the Chancellor of the Exchequer, George Osborne, delivered the Autumn Statement. This update summarises the key property implications.
On 3 December 2014, the Chancellor of the Exchequer, George Osborne, delivered an Autumn Statement any politician would have been proud of - why not a rabbit and a hat for Christmas!
The 2014 Autumn Statement appealed to 98% of homeowners by abolishing the old "slab" system of stamp duty land tax (SDLT) with effect from midnight (on 3 December 2014). The new SDLT system will apply in Scotland until April 2015 when the Scottish Parliament's own tax reforms will take effect. Businesses were also promised their (hopefully) "root and branches" review of the business rates structure.
The Chancellor also announced investment in infrastructure for roads, flood defences, and railways, particularly in the North with the intention of building a "northern powerhouse" in Manchester to rival London. Other key announcements of particular interest to the property industry are:
An extension of the temporary increase in the level of small business rate relief to 31 March 2016; it was due to end on 31 March 2015.
An increase in the annual tax on enveloped dwellings by 50% above inflation for residential properties worth more than £2 million for the chargeable period 1 April 2015 to 31 March 2016.
The introduction of an SDLT seeding relief for Property Authorised Investment Funds.
Continuing reforms to, and the streamlining of, the planning system.
Commitments to increasing the supply of housing.
Improvements to, and extensions of, enterprise zones.
Commentators are calling the 2014 Autumn Statement a "crowd pleaser" but behind the headline acts, there was an ever more vigilant focus on preventing tax avoidance such as the introduction of the so-called "Google tax" designed to ensure multinational companies pay their fair share of tax. So, overall a continued tightening of the purse strings but a few sweeteners along the way.
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2014 Autumn Statement
On 3 December 2014, the Chancellor of the Exchequer, George Osborne, delivered the Autumn Statement.
This update analyses the key implications for the property industry. For an analysis of other aspects of the Autumn Statement 2014, see Further reading.
Defined terms
The following defined terms are used in this update:
Revised structure, rates and thresholds for residential property
The government has published draft legislation that jettisons the current so-called "slab" system, under which SDLT is levied at a single rate on the chargeable consideration for a transaction (old rules), and replaces it with a "progressive" system, under which SDLT is charged at several rates according to the portion of the total consideration falling within each of several bands (new rules). This is aimed at correcting market distortions for properties with a value close to the existing borders separating SDLT rate increments.
The new rules will apply only to residential property transactions with an effective date on or after 4 December 2014, subject to transitional arrangements (see below). Non-residential, mixed property and enveloped dwellings (see Practice note, SDLT: 15% rate on enveloping high-value residential property) are unaffected by these changes.
For example, under the old rules, the SDLT charge on a residential property bought for £450,000 would be £13,500 (the entire consideration would be taxed at 3%). Under the new rules, the SDLT charge would be £12,500 (the first £125,000 would be taxed at 0%, the next £125,000 at 2% and the final £200,000 at 5%).
The effective rate of tax for properties with a chargeable consideration of £937,500 or less will be lower, or the same as, the effective rate of tax under the old rules. However, there will be an increase in the effective rate for most higher value properties. For example, a residential property bought for £1.25 million under the old rules would attract SDLT of £62,500 (effective rate 5%). Under the new rules, the charge would be £68,750 (effective rate of 5.5%).
Under transitional rules, buyers may elect to pay SDLT under the old rules in either of the following cases:
The transaction is effected under a contract entered into before 4 December 2014 unless:
the contract (or assignment of rights under the contract) is varied on or after 4 December 2014;
the transaction is consequent on the exercise of an option (right of pre-emption or similar right) on or after 4 December 2014; or
there has been an assignment, sub-sale or other transaction relating to the whole or part of the subject matter of the contract resulting in another person having the right to call for a conveyance of the subject matter.
If a person has the right to choose to account for SDLT under the old or new rules, this is done simply by including the amount of SDLT in box 14 of the land transaction return (calculated according to which rules have been selected). Pending the development of HMRC's IT systems, a stand-alone online calculator is available (see HMRC: Stamp Duty Land Tax calculator).
The draft legislation, which will be introduced into Parliament in December 2014, will be contained in the Stamp Duty Land Tax Bill. The draft Bill contains consequential amendments to existing SDLT provisions, including the linked transactions rules and multiple dwellings relief. We will publish a separate update on these measures soon.
(Autumn Statement 2014, paragraphs 1.206-1.211 and 2.121, and Autumn Statement 2014: HMRC overview paragraph 1.1.)
Multiple dwellings relief to be extended
The government announced that it will extend the scope of multiple dwellings relief (MDR) (see Practice note, SDLT: Multiple dwellings relief) to lease and leaseback arrangements of shared ownership properties entered into with a qualifying body (for example, a housing association).
Currently, the acquisition of a superior interest subject to a lease for an initial term of more than 21 years does not attract MDR (see Practice note, SDLT: Multiple dwellings relief: Interests subject to leases). The amending legislation will be included in the Finance Bill 2015 and will take effect from the date that the Finance Bill 2015 receives Royal Assent.
(Autumn Statement 2014, paragraphs 1.139 and 2.122.)
Seeding relief for property authorised investment funds
Seeding relief for property authorised investment funds (PAIFs) and co-ownership authorised contractual schemes (CACS) will be introduced. There will be no SDLT charge on transactions in units for CACS that invest in property (subject to resolution of avoidance issues). This measure should make PAIFs and CACS more attractive to investors and may see fewer properties held offshore.
Legislation will be included in the Finance Bill 2016.
The Finance Act 2013 introduced a tax on high value residential properties held by certain non-natural persons (NNPs), the annual tax on enveloped dwellings (ATED). For more information on ATED, see Practice note, Annual tax on enveloped dwellings (ATED).
Increase in charges
In the 2014 Autumn Statement , the government announced that the rates of ATED will be increased by an amount 50% above the rate of inflation. The originally stated aim was for the charges to increase only in line with the Consumer Prices Index (see Practice note, Annual tax on enveloped dwellings (ATED): Annual chargeable amount).
For the period from, and including, 1 April 2015 to 31 March 2016, the ATED charge on residential properties will be:
£23,350 for properties worth more than £2 million, up to £5 million.
£54,450 for properties worth more than £5 million, up to £10 million.
£109,050 for properties worth more than £10 million, up to £20 million.
£218,200 for properties worth more than £20 million.
These changes are to be included in the Finance Bill 2015.
In addition to these changes, on 1 April 2015 a new band comes into effect for properties worth more than £1 million up to £2 million, for which the annual charge will be £7,000. This new band was announced in the 2014 Budget, see Legal update, 2014 Budget: property implications: ATED extended in two stages and is brought into force by section 109 of the Finance Act 2014.
(Autumn Statement 2014, paragraphs 1.212, 1.213 and 2.125, and Autumn Statement 2014: HMRC Overview, paragraph 1.2.)
In the 2014 Autumn Statement, the government announced that the Finance Bill 2015 will include provisions that change the filing obligations and information requirements with respect to properties within the ATED that are eligible for a relief. These changes will take effect from 1 April 2015.
(Autumn Statement 2014 , paragraph 2.139.)
Business rates
Long-term review
A structural review of business rates, to report by Budget 2016, has been announced. Terms of reference for the review will be published in due course. The announcement has been welcomed by the British Property Federation and the British Retail Consortium.
(Autumn Statement 2014, paragraph 2.132.)
Small business rate relief
The small business rate relief provides 100% relief for eligible businesses occupying premises with a rateable value of £6,000 or below. There is a tapered relief from 100% to zero for properties with a rateable value between £6,001 and £12,000.
The temporary increase in the level of small business rate relief was due to end on 31 March 2015. It will now be extended for a further year, until 31 March 2016.
(Autumn Statement 2014, paragraph 2.127.)
Transitional rate relief
The transitional rate relief scheme sets an annual cap on increases in business rates bills. Under the scheme, which was due to end in 2015, bills for small properties could not increase by more than 15% and for medium properties by more than 25%. Transitional arrangements will be extended until 31 March 2017 for properties with a rateable value of £50,000 or below that face large bill increases.
(Autumn Statement 2014, paragraph 2.128.)
Increase in retail discount
The business rates discount for retail and food and drink premises with a rateable value of £50,000 or below will be increased for one year, from 1 April 2015, to £1,500 (up from £1,000 for 2014-15).
(Autumn Statement 2014, paragraph 2.130.)
Cap on indexation
The multiplier is increased each year in line with inflation (by reference to the Retail Prices Index in the preceding September). In 2015-16, the business rates multiplier will be capped at 2%.
(Autumn Statement 2014, paragraph 2.131.)
Business rates avoidance
The government will publish a paper on the nature and scale of business rates avoidance in December 2014 to which it will invite comments.
(Autumn Statement 2014, paragraph 2.150.)
Backdating of rateable values
Alterations to rateable values will only be permitted to be backdated to the period from 1 April 2010 to 1 April 2015 for valuation office agency alterations made before 1 April 2016 and ratepayer appeals made before 1 April 2015.
(Autumn Statement 2014, paragraph 2.129.)
Administration review
Businesses have called for clearer billing, better information sharing and a more efficient appeals system. Later this month the government will provide an update on how it proposes to respond.
(Autumn Statement 2014, paragraph 2.126.)
Devolution to Wales
Business rates policy in Wales will be fully devolved to the Welsh Government. The devolved regime will be operational by April 2015.
(Autumn Statement 2014, paragraph 2.25.)
National Infrastructure Plan 2014
The first National Infrastructure Plan was published in October 2010 in response to criticism that the development of infrastructure had been fragmented and reactive with no cohesive long-term plan. The government's National Infrastructure Plan 2014 (NIP 2014) continues to set out its aspirations for the ongoing delivery of infrastructure improvements in the UK.
In October 2014, the government announced plans to proceed with a third high speed link, HS3, to reduce journey times across the northern regions. The government has created Transport for the North which is a new body to consist of the main northern city regions.
The government and Transport for the North will produce a comprehensive transport strategy for the north. The strategy will include options, costs and a delivery timetable for a HS3 east/west rail connection. An interim report will be published in March 2015.
Northern and Trans-Pennine Express rail franchises
Invitations to tender for the next Northern and Trans-Pennine Express rail franchises will be published soon. Subject to business case development, the new franchises will:
Deliver at least a 20% increase in capacity to reduce overcrowding.
Encourage bidders to replace the outdated pacer trains with modern trains.
Bring all the remaining trains up to modern standards.
Provide additional services across the network.
Provide faster services on some of the busiest routes.
The 2014 Autumn Statement confirms that the government has committed £15 billion between 2015/16 and 2020/21 to improve the national road network with works including resurfacing 80% of the national network, adding extra lanes to key routes and improving junctions on the national road network. Local road networks are also earmarked for improvement.
(Autumn Statement 2014, paragraphs 1.115 and 2.189.)
Part of the focus on roads is in support of the northern powerhouse, the government plan to link major cities in the north of England to encourage prosperity and urban growth. Cities such as Sheffield, Newcastle, Hull, Sunderland, Leeds, Manchester and Liverpool will benefit.
£6 billion of investment is earmarked for the northern road network including:
A £640 million investment in the A1 north and west of Newcastle.
£170 million of improvements to Trans-Pennine roads.
Over £300 million will be invested in improving road links to Liverpool Port and to Ellesmere Port.
(Autumn Statement 2014, paragraphs 1.191-1.193.)
At a more local level:
The government is publishing a feasibility study on improved transport connectivity for Leeds Bradford International Airport including a new link road costed at £38 million.
(Autumn Statement 2014, paragraph 2.195.)
The government has welcomed proposals for the relief of congestion and improved transport capacity and connections in Bath city centre (as put forward by Bath and North East Somerset Council and the West of England Local Enterprise Partnership).
(Autumn Statement 2014, paragraph 2.196.)
Cycle City Ambition scheme
The government will provide £114 million between 2015-16 and 2017-18 to continue the Cycle City Ambition scheme in the eight cities it already covers (Greater Manchester, West Yorkshire, Birmingham, West of England, Newcastle, Cambridge, Norwich and Oxford). This scheme will provide capital funding for better cycle infrastructure (for example, segregated lanes and improved junctions).
(Autumn Statement 2014, paragraph 2.207.)
Hospices: VAT
The government has announced that following the Fair Playing Field Review, published on 27 March 2013, it will refund VAT incurred by hospice charities. Details to follow.
(Autumn Statement 2014, paragraph 2.20.)
Church Roof Repair Fund
The government will provide £15 million for a new Listed Places of Worship: Roof Repair Fund. In 2015, the fund will be available across the UK for the maintenance of church roofs.
(Autumn Statement 2014, paragraph 2.252.)
Flooding
The government confirmed its announcement (in 2013) that it will invest £2.3 billion in flood defences. This money will be applied to over 1,400 flood defence schemes over the next six years. An additional £60 million has been allocated to the Lower Thames Scheme beyond 2021 (subject to business case and local partnership contributions).
In the Finance Bill 2015, the government will legislate to ensure that, from 1 January 2015, business contributions to Flood and Coastal Erosion Risk Management projects will be deductible expenditure for corporation tax and income tax purposes.
(Autumn Statement 2014, paragraphs 1.116, 2.103 and 2.216.)
The government announced that it plans to look at extending the Enterprise Zone in Nottingham to a site in Derby and will consider the case for further extensions to existing Enterprise Zones. Further decisions on Enterprise Zones will be announced in the 2015 Budget.
(Autumn Statement 2014, paragraphs 1.183 and 2.31.)
In the 2011 Autumn Statement, the UK's planning and consent regime was identified as a major reason for infrastructure being more expensive to build in the UK compared with other European countries. The regime was also blamed for causing significant delays. In the 2014 Autumn Statement, the government continues its aim to streamline the planning system to make the UK a good place for businesses to invest and expand.
House building
The government is committed to increasing the supply of housing and has announced that:
Principal heads of terms have been agreed between Barking Riverside Limited, the Mayor of London and government for a loan of £55 million to support the extension of the London Overground to Barking Riverside to unlock the delivery of 11,000 homes.
It will support the London Borough of Brent and the Greater London Authority plans for the regeneration of Brent Cross which could deliver 7,500 homes.
It is taking forward the commitment to build the first new garden city at Ebbsfleet which will deliver up to 15,000 homes.
It will invest £141 million in the redevelopment of the Queen Elizabeth Olympic Park.
It has approved funding (under the £150 million estates regeneration fund) for Grahame Park, Blackwall Reach, Aylesbury Estate and New Union Wharf regeneration projects.
Between 2015-20, it will release public sector land with the capacity for up to 150,000 houses.
It will support the building of 13,000 new homes in Bicester.
It will take forward the development of Northstowe. This will support the construction of up to 10,000 new homes.
(Autumn Statement 2014, paragraphs 1.130-1.136.)
Speeding up the planning system
The government has announced that it will take the following steps to speed up the planning decision process:
Bring forward measures to ensure that the principle of development need only be established once.
Take steps to speed up section 106 negotiations. This will include issuing revised guidance, consulting on a faster process for reaching agreement, considering how timescales for agreement could be introduced and improving transparency on the use of section 106 funds.
Keep the speed of decisions on major applications under review, with the minimum performance threshold increasing to 50% of major decisions made on time.
Publish new data on local authorities' performance in meeting their statutory duty to process smaller planning applications within eight weeks.
Work with industry and local authorities to test whether more can be done to support the approval of small sites in the planning system.
Publish proposals for consultation at Budget 2015 on making the compulsory purchase regime clearer, faster and fairer with the aim of bringing forward more brownfield land for development.
(Autumn Statement 2014, paragraphs 1.141 and 2.44-2.49.)
National Networks National Policy Statement
The government plans to lay the National Networks National Policy Statement before Parliament in December 2014 for consideration and a formal vote. For further information on National Policy Statements, see Practice note, Planning Act 2008: National Policy Statements.
The government announced it will extend affordable housing capital investment to 2018-19 and 2019-20 at £955 million per year. It is on track to deliver 165,000 affordable homes over the 2015-18 period.
(Autumn Statement 2014, paragraphs 1.138 and 2.37.)
Shared ownership
The government confirmed it will:
Stimulate investment in shared ownership by extending the scope of SDLT multiple dwellings relief to cover lease and leaseback arrangements with housing associations on shared ownership properties.
Launch a consultation on options for streamlining the process for selling on shared ownership properties.
Work with housing associations, lenders and the regulator to identify and lift barriers to extending shared ownership.
(Autumn Statement 2014, paragraphs 1.139-1.140 and 2.42.)
Housing associations
The government announced it will consult on ways to increase the borrowing capacity of housing associations in relation to the valuation of properties transferred from local authorities.
(Autumn Statement 2014, paragraph 2.40.)
Social housing estates funding approvals
Grahame Park, Blackwall Reach, Aylesbury Estate and New Union Wharf regeneration projects have been approved for funding under the £150 million fund announced in the 2014 Budget. The projects are aimed at stimulating the regeneration of large social housing estates but are still subject to due diligence and contract negotiations.
(Autumn Statement 2014, paragraphs 1.134 and 2.41.)
Mortgage fees
The government has asked the Council of Mortgage Lenders (CML) to liaise with Which magazine with the aim of making mortgagee fees more transparent and helping borrowers choose the best mortgage deal more easily.
The government announced that Ordnance Survey will create a free online map of all the publicly-accessible green space in England and Wales. At the moment, the general public can access areas of the countryside for walking or other leisure activities. Currently they would have to search for these areas through their local council, but this map would provide the general public with easier access to this information.
(Autumn Statement 2014, paragraph 2.219.)
Social investment tax relief
The government has announced that it will increase the amounts that can be invested in an individual organisation and qualify for Social Investment Tax Relief (SITR). SITR has been in place since 6 April 2014, to incentivise direct private investment in social enterprises.
The amount that individuals can invest in social enterprises are amended as follows:
An annual limit of £5 million will be introduced.
The overall amount will be increased to £15 million.
The measure will allow certain small agricultural and horticultural projects that will not be eligible for direct payments under the Common Agricultural Policy reforms to be qualifying trades for the purposes of SITR. For more information on SIRT see, Practice note, Social investment tax relief (SITR).