Heather Powell: Head of Property and Construction
Residential property developers tax
4% for all developers reporting profits over £25 million – but no tax relief for those who have already replaced cladding on the buildings they have built. Where is the reward for a commitment to look after your customers and “do the right thing”?
The Chancellor has created a huge moral quandary for any business where a similar crisis occurs in the future – should they do their best to correct the issues, or wait for the Government to tax them?
How many want to pay for errors twice?
Whilst we can all delight in the Chancellor’s report that unemployment is not going to reach 12%, and that wages have risen by 3.5% from February 2020, construction companies may not be quite as pleased – the skills crisis looming over the industry due to an ever-aging workforce, and the reduction of EU workers on our building sites is not going to be solved by a clamour of unemployed people looking to move into the industry.
The challenge for the industry is to become an industry that attracts school leavers and graduates, as apprentices, professionals, and managers to build up a workforce with the right skills and enthusiasm to allow the industry to deliver the infrastructure our country depends on – and for which the Chancellor is releasing funding across all regions.
Property investment
Property investors now have an added incentive to improve their businesses, as improvements that add to the value to their properties will not generate an increase in the business rates for a year. While the cost of the improvements will remain significantly greater than the rates “saving”, this is a welcome addition to the financial appraisal for investors considering investing in improvements to their properties.
While the announcement that commercial rates will not be increased for a year after improvements that increase the value of a property have been completed will not make a significant difference to the profits of a landlord, they are a welcome addition to the financial appraisal landlords completed before committing to improving their properties.
Sean Randall: Partner
Stamp Duty Land Tax
There were no changes announced to Stamp Duty Land Tax. The tax bands, rates and reliefs will continue to operate unchanged. Next year’s charges for the tax’s cousin, the annual tax on enveloped dwellings, were published, but they merely track inflation and were expected. Those hoping for major changes to the tax, another “holiday” from it, a new relief for zero-carbon homes or new tax rules for shared-ownership schemes, will have to wait.
Freeports
Legislation is expected to be published in two days’ time formally designating the eight sites that will qualify for tax reliefs for businesses investing in freeports. More legislation is expected in November to “switch on” the tax reliefs. The tax reliefs include an enhanced capital allowance, a full relief from Stamp Duty Land Tax and full business rates relief. This announcement is only an update to the timing of the freeport tax site designation process. Provision was made in this year’s Finance Act for the reliefs.
The Chancellor has created a huge moral quandary for any business where a similar crisis occurs in the future.
Genevieve Morris: Head of Corporate Tax
It is disappointing but not surprising that the Chancellor is pressing ahead with his stealth tax on larger property developers. These are the businesses that the country need to rely on to meet housing demand, and to hit them with this tax increase, whether temporary or not, at a time where businesses are already facing an increase in the main rate of Corporation Tax from 19% to 25% in April 2023 and recovering from the Covid years, will be a huge blow.
It does set Rishi’s stall out – he will be prepared to tax different sectors in different ways in order to meet specific funding needs. What’s next – an aviation or motor retail tax to help tackle the green agenda? We’ve had the bank levy in the past, and now the residential property developer tax – I think we will see more sector specific tax hikes over the course of this Government.
We can only hope that it doesn’t result in these businesses needing to cut costs elsewhere and a knock-on impact on employment.
Alexander Altmann: Partner
The Chancellor promises one million new homes – but will they be built in a sustainable way? He should reintroduce zero-carbon building certificates and lower Stamp Duty Land Tax to incentivise building greener.
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