With no Government funding or grants available to achieve net zero greenhouse gas emissions by 2050, landlords need to maximise the tax relief that they can claim for the works they are required to undertake, writes our Head of Property and Construction, Heather Powell.
No sign of funding for landlords
Government consultation documents offer no hint of grants or other funding for the significant works that many landlords will need to undertake to meet property standards being set by the Government.
The consultations have made it clear that landlords are going to be made to pay for the improvements required. They set out proposals to ban the letting of industrial and commercial buildings which do not have an Energy Performance Certificate of B or above from April 2030, and the letting of homes which do not have an Energy Performance Certificate of C or above from April 2025. The current threshold for all properties is a certification of E.
Planning for ‘net zero’ by 2050
Achieving ‘net zero’ by 2050 is a key objective of all political parties and landlords need to prepare for the implementation of this legislation by assessing and undertaking the necessary works or planning the sale of their properties.
With no other support available, landlords who have no plans to sell need to maximise the tax relief that they can claim on works that need to be carried out, especially as many of the reliefs are only available for a specific period.
Companies can claim a ‘super deduction’ for plant and machinery of 130% of the price paid up to 31 March 2023. There is no limit on the amount that can be claimed, and the deduction is applied against the rental profits for the year – significantly reducing the Corporation Tax payable on the profits for the year in which the plant is acquired.
The relief for partnerships and individuals is not as generous, but they can claim for property purchased via the Annual Investment Allowance, which gives tax deduction of up to £1 million a year. The £1 million allowance is available up to 31 March 2023, thereafter it falls to £200,000.
Expenditure that does not qualify for these capital allowances may qualify as a repair, and thus as a deduction against profits for all landlords. Unfortunately, there is no clarity on this point in the tax legislation.
Further incentives needed for landlords
As the requirement to undertake the works is being imposed by the Government, it would appear to me to be reasonable for the passing of the Energy performance Certificate (EPC) legislation to be introduced at the same time as confirmation from the Treasury that a full tax deduction will be available to all landlords for the costs incurred of improving the EPC status of their property. This would incentivise all landlords to undertake the works and would be a win-win for everyone.
Would you like to know more?
If you would like to discuss the above or how it may affect you and your business, please get in touch with Simon Rothenberg or your usual Blick Rothenberg contact using the details on this page.
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