Highlights of key announcements in the Budget for real estate and construction clients are set out below.
Stamp duty land tax (SDLT)
- The temporary increase in the nil rate band for residential property purchases in England and Northern Ireland has been extended, so that:
- the current £500,000 threshold will be in place until 30 June 2021 (rather than ending on 31 March 2021); then
- an interim nil rate band of £250,000 will be in place between 1 July 2021 and 30 September 2021; and
- it will return to the standard level of £125,000 from 1 October 2021.
- First time buyers’ relief, which has no effect while the nil rate band is £500,000, will resume from 1 July 2021.
- Certain qualifying housing co-operatives will be eligible for relief from the annual tax on enveloped dwellings (ATED) and the 15 per cent SDLT rate that otherwise applies. The SDLT relief (which will need to be claimed) will apply on transactions where the effective date is on or after 3 March 2021. The ATED relief will apply from the first chargeable period beginning on or after 1 April 2020, so qualifying housing co-operatives that have paid ATED for the 2020/21 period can claim a refund for any amount already paid in respect of that period.
- Relief for freeports – SDLT relief will be available for qualifying purchases of land and buildings within a freeport tax site (on transactions with an effective date falling between the date the relevant freeport tax site is designated and 30 September 2026). The relief is subject to a ‘control period’ of up to three years, or until there is a disposal of the land to an unconnected party, and the land and buildings must be both acquired for use, and actually used, in a ‘qualifying manner.’
- A 2 per cent SDLT surcharge on residential property purchased by non-residents will commence for transactions with an effective date on or after 1 April 2021, subject to transitional rules affecting contracts entered into before that date.
The temporary reduction in the VAT rate applicable to hospitality, accommodation and attractions has been extended (the rate remains at 5 per cent until 30 September 2021, increasing to 12.5 per cent after that date, until it returns to the standard 20 per cent rate from 1 April 2022)
- A ‘super-deduction’ has been introduced for corporation tax payers, available on qualifying capital expenditure incurred between 1 April 2021 and 31 March 2023, resulting in:
- an up to 130 per cent first-year capital allowance on qualifying new and unused main pool plant and machinery; and
- a 50 per cent first-year allowance on qualifying new and unused special rate pool assets.
- The temporary increase in the annual investment allowance (AIA) limit to £1m is extended to 31 December 2021. It will reduce to £200,000 from 1 January 2022.
- Companies with qualifying capital spend of more than £1m will need to consider the allocation of the super-deduction allowances and AIA to maximise tax savings.
- Special allowances for freeports comprise:
- an enhanced 10 per cent rate of structures and buildings allowance (normally 3 per cent) for constructing or renovating non-residential structures and buildings within freeports; and
- an enhanced first-year capital allowance, providing 100 per cent relief for businesses investing in plant and machinery for use in freeports.
Business rates relief is to be provided for eligible retail, hospitality and leisure properties, as follows.
- 1 April 2021 to 30 June 2021 – 100 per cent relief.
- 1 July 2021 to 31 March 2022 – 66 per cent relief (capped at £2m per business for properties required to close on 5 January 2021, or £105,000 per business for other eligible properties).
The capital gains tax annual exempt amount is maintained at £12,300 for tax years up to and including 2025/26.
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