Legislation will be introduced to increase the standard rate of VAT from 17.5% to 20%. The new rate will have effect for any supply made on or after 4 January 2011. Zero rated and exempt supplies are unaffected by the change.

Anti-forestalling legislation will be introduced to counter arrangements that purport to apply the 17.5% VAT rate to goods or services to be delivered or performed on or after 4 January 2011. In certain circumstances there will be a supplementary charge to VAT of 2.5% where 17.5% VAT has been declared.

Forestalling will occur when arrangements are put in place for a VAT invoice to be issued by a supplier, or payment to be received by a supplier, before 4 January 2011, where the supply is not due to be made until or after 4 January 2011.

The anti-forestalling legislation will apply in certain specified circumstances where the supplier and customer are connected parties. There will be similar measures to prevent the use of the grant of standard-rated rights or options as an avoidance mechanism.

The supplemental charge will not apply to prepaid or invoiced rentals of land, buildings or other assets if the period concerned is a year or less, and the prepayment, or the issuing, of an advance invoice is normal commercial practice.

For more information, see Legal Update, June 2010 Budget: key business tax announcements: VAT.

(See June 2010 Budget - BN 44 - VAT: Change of standard rate: Anti-forestalling legislation.)

Lennartz accounting is a method of recovery of input tax incurred on the purchase of immovable property and certain other assets used partly for business and partly for non-business purposes. Lennartz accounting allows businesses to recover input tax in full, upfront, on both the business and private use of the asset. VAT is then payable over subsequent years in respect of the private use of the asset. Consequently, Lennartz accounting has cash flow advantages for businesses.

As announced in the March 2010 Budget, Lennartz accounting will be abolished so that VAT recovery is restricted only to the business use of the asset. For example, there will be no entitlement to any VAT recovery on the private use of directors' accommodation.

The change will take effect from 1 January 2011. Existing Lennartz accounting users will continue to pay VAT due under the Lennartz accounting mechanism.

For more information, see Legal Update, June 2010 Budget: key business tax announcements: VAT.

(See June 2010 Budget - BN 42 - VAT: Lennartz accounting: Restricting application and securing revenue.)

A new higher CGT rate of 28% will be introduced with effect from 23 June 2010. For individuals, the rate will remain at 18% where total taxable gains and income are under the upper limit of the income tax basic rate band (£37,400 for 2010-11). The new 28% rate will apply to gains, or any parts of gains, above that limit. For trustees and personal representatives, the rate will be increased to 28% from 18%. There will be no change in the annual exempt amount, which will remain at £10,100 for 2010-11.

The new higher rate will particularly affect owners of second homes, holiday homes and buy-to-let landlords. As the increase will take immediate effect, any opportunity to sell such properties in advance, to avoid the higher rate, has already passed.

For more information, see Legal update, June 2010 Budget: key business tax announcements.

(See June 2010 Budget - BN 20 - Capital gains tax: rates and entrepreneurs' relief.)

The government has confirmed its intention to proceed with legislation on private residence relief (PRR) as announced by the former Labour government.

PRR is a relief from CGT that applies on the disposal of an individual's only or main residence. However, it is not available on any part of a house that is used exclusively for the purposes of a trade, business, profession or vocation (sections 224(1) and (2), Taxation of Chargeable Gains Act 1992). Therefore, where a person caring for an adult under a local authority placement scheme sets aside part of their house for the adult's use, PRR may not be available on that part of the house when the carer disposes of it. For more information, see Practice note, Capital gains tax: principal private residence relief: overview.

In the 2009 Pre-Budget Report, the former Labour government announced plans to amend the rules for PRR to ensure entitlement to the relief where a carer provides accommodation to a vulnerable adult under an adult placement carers scheme. For details, see Legal update, 2009 Pre-Budget Report: key private client tax announcements: PPR preserved for adult placement carers.

The government has announced that it will proceed with legislation, which will apply to disposals occurring on, or after, 9 December 2009. The legislation will remove any possible restriction on claiming PRR where adult placement carers use part of their home exclusively for the accommodation of an adult in care.

(See June 2010 - BN 28 - Capital gains tax: private residence relief and adult placement carers.)

The June 2010 Budget has confirmed that a new SDLT rate of 5% for purchases of residential property where the consideration exceeds £1 million, will take effect on 6 April 2011.

The new rate was announced in the March 2010 Budget. The previous highest rate was 4% for purchases where the consideration exceeds £500,000. All other SDLT rates and thresholds remain unchanged.

For further information, see Legal update, March 2010 Budget: implications for property.

In the March 2010 Budget, the former Labour government announced the introduction of SDLT relief for first-time buyers of residential property where the consideration does not exceed £250,000.

In the June 2010 Budget, the new government said that it will review first-time buyer relief taking into account its impact on affordability and value for money.

The former Labour government stated that the relief would be available where the effective date falls on or after 25 March 2010 and before 25 March 2012. Where the relief is available, the nil rate threshold is effectively doubled.

The existing nil rate of SDLT on residential purchases not exceeding £125,000 continues to apply as before (which means that it is not limited to first-time buyers).

For more information, see:

In the June 2010 Budget, the government announced that it will examine whether the SDLT rules for high value property transactions need to be changed to combat tax avoidance in this area.

This forms part of an overall drive by the government, to tackle tax anti-avoidance measures in general.

(See June 2010 Budget - Press notice 03: Tackling tax avoidance.)

In the June 2010 Budget, the government confirmed that legislation will be passed after the summer recess, to amend the SDLT mistake relief rules.

The proposed legislation, to introduce a single statutory regime to deal with the recovery of overpaid SDLT, was announced in the March 2010 Budget and will take effect from 1 April 2011.

Paragraph 34 of Schedule 10 to the FA 2003 provides relief where a person has overpaid SDLT and both the following conditions apply:

No SDLT mistake relief can be claimed if the land transaction return was submitted in accordance with the practice at the time or where the mistake was governed by another statutory claim (paragraph 34, Schedule 10, FA 2003).

The amendment will remove the conditions for claiming relief, ensuring that there is a means of reclaiming overpaid SDLT where there is no other statutory route by which to do so.

Claims submitted prior to 1 April 2011 must be submitted within six years of the effective date of the transaction. From 1 April 2011, the time limit will be four years.

(See June 2010 Budget - BN35 - Relief for overpayments of stamp duty land tax and petroleum revenue tax.)

In May 2010, the government introduced emergency regulations suspending payment of certain backdated business rates bills. Changes to the method of calculating business rates in 2008 meant that many port-based companies had received large backdated bills. Payments by affected businesses, including those in ports, have been frozen until April 2011.

The government will introduce legislation to cancel such backdated business rates bills. The legislation will apply to newly assessed properties that were split from a larger rateable property and which are eligible for the eight-year schedule of payments scheme. For information on the eight-year schedule of payments scheme, see Legal update, Eight year instalment option for backdated business rates liability.

The government has confirmed that it will implement a temporary increase in the level of small business rate relief in England, as announced by the former Labour government in the March 2010 Budget. This increase will apply for one year from October 2010 and will give full relief for eligible businesses occupying premises with a rateable value of up to £6,000, and tapering relief for businesses occupying premises with a rateable value of up to £12,000.

For more information, see Legal update, March 2010 Budget: implications for property: Small business rate relief.

On 4 January 2011, the standard rate of Insurance Premium Tax (IPT), currently 5%, will increase to 6%. The standard rate of IPT applies to property insurance, so this change will be of interest to the property industry.

Also on 4 January 2011, the higher rate of IPT will rise to 20% from the current rate of 17.5%, matching the increase in the standard rate of VAT that takes effect on the same day. For more information on the VAT rise, see VAT above.

The new rates of IPT will apply to premiums received or written by an insurer on, or after, 4 January 2011.

For more information on IPT and the rate changes, see:

The June 2010 Budget has announced that, with effect from April 2011, it will switch from the Retail Prices Index (RPI) to the Consumer Prices Index (CPI) for the price indexation of certain benefits and tax credits, and that from the financial year 2013/14 the CPI will be used to adjust housing benefit.

The CPI (known in an international context as, Harmonised Index of Consumer Prices (HICP)), was designed as a macro-economic measure of consumer price inflation. It was developed according to internationally agreed rules and is used for international comparisons of inflation. In a UK domestic context it has formed the basis for the government's inflation target to be achieved by the Bank of England's Monetary Policy Committee.

The government believes that the CPI is a better indication of the way in which consumers change their consumption behaviour in response to price changes. This is partly because, unlike the RPI, the CPI does not include as many housing costs, which are often only relevant to home buyers. It will also be consistent with the measure of inflation used by the Bank of England.

The government sees housing benefit as a potential disincentive to work and has expressed considerable alarm at the fact that spending on housing benefit has risen from £14 billion to £21 billion over the last ten years.

The Office for Budget Responsibility (OBR) has admitted that the effect of the introduction of new housing benefit rules, is uncertain. It expects that the budget policy costings may alter as evidence on the impact of the changes becomes available.

However, the present assessment is that the following package of measures will reduce the costs of housing benefit by £1.8 billion by May 2015, representing a 7% cut in the total budget for housing benefit.

From April 2011:

From October 2011, local housing allowance rates will be set at the 30th percentile of the applicable local rents comparator. Currently, the local housing allowance rate for each property size is based on the middle of the range rental figure for the area.

From April 2013:

From the financial year 2013/14, local housing allowance rates will be adjusted in line with CPI.

From October 2010, SMI will be tied to the Bank of England's published average mortgage rate. This will rectify the fact that it has been frozen at 6.08% since late 2008, even though interest rates have fallen significantly since then.

For more on SMI, see Practice note, Help for residential borrowers struggling with mortgage repayments.

The June 2010 Budget confirmed the establishment of Infrastructure UK (IUK) to lead work within HM Treasury to:

In autumn 2010, the government will publish a national infrastructure plan that will set out goals for UK infrastructure.

The establishment of IUK was confirmed in the 2009 Pre-Budget Report and on 24 March 2010, IUK published Strategy for national infrastructure (strategy). The strategy looks at the UK's infrastructure networks, which enable people, goods, energy, information, waste and water to move around the UK, and in some cases, across its borders.

For further information on IUK and the strategy, see:

The June 2010 Budget confirmed the upgrade of the Tyne and Wear Metro, the extension of the Manchester Metrolink, the redevelopment of Birmingham New Street Station and improvements to the rail lines to Sheffield and between Liverpool and Leeds.

The government wants locally-elected leaders, working with business, to lead economic development. As part of this change, the June 2010 Budget announced the abolition of Regional Development Agencies through the Public Bodies Bill.

In summer 2010, the government will publish a white paper setting out details of these proposals. As part of this process, the government will:

The June 2010 Budget announced the creation of a regional growth fund to finance regional capital projects for 2011-2013. This fund will be used to help areas and communities particularly affected by reductions in public spending and will operate in England only. The fund will support increases in business employment and economic growth. The Scottish government and Welsh Assembly government will be encouraged to undertake similar action.

In summer 2010, the government will publish a white paper setting out its plans for a new approach to sub-national growth.

In the June 2010 Budget, the government announced the sale of High Speed 1, also known as the Channel Tunnel rail link, which runs from London St Pancras to Folkestone. The successful bidder will become the owner of HS1 Ltd, with a 30-year concession to run the line and stations.

Following the Spending Review, the government will make a decision on the future capacity of the Dartford Crossing and the possibilities for letting out a concession.

In addition, the June 2010 Budget announced that over the next 12 months the government will:

The government will monitor lending from the Public Works Loan Board (PWLB) more closely. The PWLB is a statutory body and is responsible for lending money to local authorities and other public sector bodies, as well as collecting the repayments.