In the annual cycle of Spring Budget and Autumn Statement, with measures announced far in advance, it is always challenging to keep track of what is taking effect when, writes Jane Parry, lead tax partner at PM+M. In 2015 that will be amplified by the fact that we have a general election in May, meaning that we are unlikely to have a full Finance Bill in the spring.
Instead we are likely to have a small Finance Bill in the spring followed by one or even two more later in the year, as happened in 2010. As such, whilst we may have an indication of what is planned to take effect, if we have a change of Government in the meantime, we may see some amendments. That can make advance planning challenging for businesses and investors.
Key measures affecting North West property sector include:
A much welcomed review of business rates is set to take place, with resulting measures scheduled for inclusion in the 2016 Budget. There has been intense lobbying, particularly from the high street retail sector on the need for reform to help struggling retailers compete with their online competitors. UK business rates are the highest in the EU and big businesses have been lobbying for reductions to improve UK competitiveness.
The reduction in the main Corporation Tax rate to 20% on 1 April, combined with the Annual Investment Allowance for investment in plant and machinery of £500,000, which applies until 31 December 2015, look set to make 2015 a good year for successful businesses to reinvest. The Annual Investment Allowance is particularly valuable for those commercial property investors who are investing in new property or improving existing ones. Whether the £500,000 allowance is extended beyond 31 December 2015 remains to be seen. At present, it is set to reduce to £25,000 and the Chancellor has made no mention of extending it as yet.
Overseas investors in residential property will be affected by a raft of measures taking effect in April which will bring their properties into the UK capital gains net for the first time.
The modernisation of Stamp Duty Land Tax on residential properties so that the current distortion around the rate thresholds is removed is a welcome change and should provide further impetus to the North West housing market and construction sector.
At the top end of the housing market, the reduction in the threshold at which the annual tax on enveloped dwellings (ATED) charge applies from £2m to £1m in April 2015 and then £500,000 in April 2016 may start to have an impact on the North West residential property market from next year. At present, its impact has largely only been seen in the South East. The threat of a new Mansion Tax should we have a new Labour Government may also have an impact.
The major pension reforms taking effect in April and introducing considerably more flexibility into the pensions regime are welcome news for people seeking to invest in property via their pension scheme. The removal of the need for schemes to buy annuities and the ability to pass pension funds on tax efficiently down the family are likely to tempt more pension schemes into the property investment market.
The Chancellor made much of the Northern Powerhouse and his plans to invest in the great cities of the North. There seemed much to like in what he announced – infrastructure and connectivity improvements, modernised train rolling stock, investment in advanced materials and high value manufacturing research and a new Sovereign Wealth Fund to focus fracking receipts on the Northern Powerhouse.
As always, the detail of the measures will be important, but it seems likely that the economy of the North West will be boosted and it is hoped that this will spread across the region, not just stay in Manchester, encouraging private sector investment across the North West property market and increasing construction activity.