Budget 2020: What to look out for in the real estate sector

Several changes were announced in the general election process and we are expecting to see these confirmed. Click on each of the headings to read more. 

So what else may be in the Budget?

It was confirmed, in the election process, that the triple lock on pensions would remain and that there would be no tax rises on VAT or NIC. However, the government still needs to find extra funding to balance its books by 2023, if they stick to what had been the policy of the previous Chancellor. On the other hand the new Chancellor has talked of "levelling up", which is likely to mean we get more expenditure on infrastructure and other capital projects around the country. This will be watched with interest by those looking to invest in the UK, for example, if they are deciding where to build more housing. However, raising the cash for this is likely to put other areas into the firing line for tax rises which could include:

• Tax reliefs to assist the environment, sustainability, climate change and zero carbon agendas. These topics are high up many peoples' and CEOs' lists of concerns, but implementation comes at a cost to business.  It would be helpful to see tax (now in the form of enhanced reliefs) being used as a tool to encourage good behaviour in this area - and sooner rather than later.  These reliefs could include:
  
  - reduced or zero SDLT on a top EPC rating;
  
  - new capital allowances – including maybe extending SBAs for certain carbon neutral expenditure or energy efficient expenditure in the residential sector; and
  
  - zero-rating of VAT for appropriate expenditure e.g. on refurbishment to make buildings more sustainable. If zero-rating proves too expensive (which was what proved to be the case when this was previously mooted by the industry for general repairs and maintenance) perhaps (now we have left the EU) a lower 5% rate could be considered. This issue is ever more important as housing targets are still a long way from being met and VAT reliefs may impact positively on viability and in speeding up delivery of homes.
  
  No doubt the industry would be happy to provide suitable costings to assist with the relevant cost benefits analysis.
  
  Partner Russell Warren discusses the way in which the tax regime could help combat climate change in this briefing.

• A new form of professional investor fund structure - neither listed nor heavily regulated, which could be used to meet the needs of more sophisticated investors for whom UK's existing range of fund structures do not provide a complete solution. Perhaps we could see something that looks like an unregulated contractual scheme - that in practice would, in a real estate context serve to deliver something like an old form JPUT but onshore (though not adopting a trust structure). The Investment Association is working with Association of Real Estate Funds (AREF) on this already, so some announcement following Brexit would be good for the industry.
  
  
  
• At a more granular level, the industry has been lobbying for some time for an exemption from the construction industry scheme for landlords' contributions to tenants carrying out landlords' (not tenants') works and for the ability to make CIS group certifications.

Return to Budget Watch 2020.