The Chancellor of the Exchequer George Osborne delivered his Autumn Statement to Parliament on 3 December. This included a variety of announcements affecting both individuals and businesses, with changes to personal taxes, businesses taxes, and anti-avoidance regimes. We are particularly interested here about the implications for property owner and occupiers.
Stamp Duty Land Tax
Stamp Duty Land Tax (“SDLT”) applies on many property transactions, whether on transfer of ownership or dealings with leases.
The changes announced affect residential purchases from 4 December. The changes are twofold.
Firstly, the mechanism for calculating the SDLT liability is changing. SDLT is charged on the purchase price and the rate of tax payable depends upon which bracket the price falls into. Previously the relevant tax rate would apply to the whole of the purchase price. This has however changed so that the purchase price is effectively broken down into chunks, with the relevant tax rate applying to each portion of the purchase price which falls within each of those brackets.
Secondly, as part of the reform the price brackets and tax rates have also changed. HMRC identified £937,500 as the point at which the rates increase really starts to bite, and indicate that purchasers buying for less than that will either pay the same or less SLDT.
It has been said that the previous system distorted the market, as it was difficult to sell a property with a purchase price just into the next price bracket. It is thought that the new system will mean that 98% of purchasers will make a saving on SDLT, and will stop purchasers sometimes trying to find artificial ways to reduce the SDLT liability.
The new regime applies to all properties purchased after 4 December. There are however transitional provisions for those purchasers who have already exchanged contracts before 4 December but due to complete afterwards, whereby purchasers can elect to use whichever regime benefits them.
There are no changes to the requirements for submitting an SDLT Return (which may be the case even if no tax is due), and for paying SDLT which must still be done within 30 days of the purchase.
Purchasers in Scotland will only fall under the SDLT regime until 31 March 2015, which from 1 April will be replaced by the Land and Buildings Transaction Tax.
Annual Tax on Enveloped Dwellings
The Annual Tax on Enveloped Dwellings (“ATED”) is, as the name suggests, a tax charged annually. This is still relatively new, having been introduced by the Finance Act 2013.
The ATED applies to high value residential properties held by certain ‘non-natural persons’.
This will increase by an amount 50% above the rate of inflation for residential properties for the chargeable period from 1 April 2015 to 31 March 2016. The charge is based upon price brackets for properties worth £2million upwards.
These changes will be included in the Finance Bill 2015.
It had already been announced in the 2014 Budget that from 1 April 2015 properties worth between £1million and £2million would also be subject to the ATED and that rate has not changed under the Autumn Statement.
The Finance Bill 2015 will also include provisions changing the filing obligations and information requirements, after HMRC launched a consultation in July having acknowledged that complying with the obligations can be onerous.
The business rates system has been branded as ‘archaic’ and it was announced in the Autumn Statement that the system will undergo a structural review.
In the meantime a number of particular changes have been announced, which includes small business rates relief.
Small business rates relief had been temporarily doubled, which was due to end on 31 March 2015 but has been extended for another year. This will give eligible small business, such as high-street shops, pubs and cafes, a £1,500 discount on business rates. The relief is 100% for premises with a rateable value of £6,000 or less and tapered from 100% to zero for those with a rateable value of £6,001-12,000.
Planning and Housing
The planning system has been subject of much criticism in recent years and more recently a variety of measures to improve it, key factors being the implications for pushing up the price of building infrastructure and also the delays caused by the planning process.
In the Autumn Statement the government appears to remain committed to continuing to find ways to streamline the planning system.
The announcements included support and even investment for a number of projects across the country including both new and re-development.
Further steps are also being taken to speed up the planning decision process.
In relation to housing more specifically, the government announced that it will extend capital investment in affordable housing and that it remains on track to deliver what was anticipated until 2018.
A variety of measures are being implemented to stimulate investment in shared ownership properties, including SLDT relief, consulting on how the process can be made easier for selling on shared ownership properties, and working with housing associations and lenders to reduce the obstacles to extending shared ownership.
The government has also asked the Council of Mortgage Lenders to liaise with Which? magazine to consider how to make it easier for borrowers to choose the best deal and for lenders to make their fees more transparent.
Should you have any particular queries or concerns please get in touch for further advice. Otherwise keep an eye on future issues of our Real Estate Brief for updates on the implementation of the changes, and the results of any consultations, as and when available.
For more information please contact Rebecca Freeman on 01789 206124 or by email.