On 27 October, the UK’s Chancellor of the Exchequer, Rishi Sunak, delivered his Autumn Budget with the key announcements again unsurprisingly dominated by policies to support recovery from the COVID-19 pandemic. The majority of the announcements made by the Chancellor confirm measures that had already been published, with limited tax changes impacting the real estate sector.
4% tax on residential property development profits confirmed
The Government has confirmed that it will introduce, with effect from 1 April 2022, a new tax on companies that earn profits from UK residential property development, intended as a revenue-raising measure to fund the removal of unsafe cladding. The new tax will be at a rate of 4% and will apply to a company's profits from UK residential property development where they exceed an annual allowance of GBP25 million (applied on a group basis).
Business rates reliefs and reforms
A 50% business rates relief (up to a cap of GBP110,000) will apply to hospitality, retail and leisure properties (including pubs, cinemas, restaurants, hotels, theatres and gyms) in England for 2022 to 2023. In addition, following the Government's review of business rates, new measures have been announced to take effect from 1 April 2023:
- a new 100% business rates improvement relief will be introduced, with the intention that, where a business carries out improvements to a property that increase its rateable value, its business rates are not increased for 12 months;
- to support investment in green technology, the Government will bring in exemptions from business rates for plant and machinery used in generation and storage of renewable energy, along with a 100% relief for eligible heat networks; and
- revaluations for business rates will take place every three (rather than five) years.
Extension of GBP1 million annual investment allowance to 31 March 2023
The Chancellor announced that the temporary increase to GBP1 million in the annual investment allowance limit (a form of capital allowance that broadly provides a 100% deduction against taxable profits for qualifying expenditure on plant and machinery), and that had previously been due to expire on 31 December 2021, will be extended again to 31 March 2023.
Should you have any queries on the Autumn Budget, please reach out to your usual UK tax contact or one of the contacts below.