Rishi Sunak laid his post-Covid-19 recovery budget on the table against a backdrop of uncertainty with a focus on investment, net zero and levelling up. For commercial property owners some movement on business rates reform will be welcome. However, with rising property values and pressure on businesses, it remains to be seen whether the reforms go far enough.
Few initiatives were pledged in the budget with regards to green energy commitments and improving energy efficiency in buildings. Perhaps with the COP26 Conference taking place in Glasgow, Mr Sunak felt he should hold off on ‘green’ announcements.
Business rates reform
One of the more significant announcements within the budget were reforms to business rates, which will be a welcome relief to many in the retail, hospitality and leisure industries. The budget ambitiously sets out that the business rates reforms will make the system fairer and more supportive of investment, with the proposals supposedly set to reduce the business rates burden by over £7bn across the next five years.
The reforms include:
- Rates reviews to occur every three years (currently every five years)
- 50% business rates relief for 12 months up to a maximum of £110,000 for retail, hospitality and leisure
- 100% business rates improvement relief for one year to be introduced in 2023
- Introduction of business rates improvement relief from 2023 to 2035 to encourage investment in green technology and energy-efficient property improvements (such as solar panels)
- Business rates multiplier frozen for a second time to March 2023
In the run up to the budget there were reports of an online sales tax of 2% being introduced, however, no such tax was announced. A levy on online sales could compensate for a reduction in business rates. It could also balance out the tax burden across online retailers and bricks-and-mortar shops. Discussions over the introduction of an online sales tax continue.
Residential Developer Property Tax
As expected, the budget confirmed the new Residential Property Development Tax (RPDT) will come into effect from 1 April 2022. Companies carrying out UK residential property development will be subject to RPDT at a rate of 4% on profits in excess of an annual allowance of £25m. Non-profit housing companies, student accommodation and care homes will be excluded.
The temporary increased Annual Investment Allowance of £1m for qualifying plant and machinery will be extended until 31 March 2023 rather than reverting to £200,000 from 1 January 2022.
Capital Gains Tax
The government is extending the 30 day deadline for reporting and paying Capital Gains Tax on UK residential property disposals to 60 days. This will apply to sellers of second homes in the UK and disposals by non-UK residents.
This deadline has been a challenge for taxpayers. For those who were unable to accurately quantify and disclose their gain in time, the options were to submit the return late (at the risk of interest and penalties) or to submit a return based on best estimates, with the knowledge that if overpayments were made they would be slow to reclaim.