The Autumn Statement, announced by Chancellor of the Exchequer George Osborne on 5th December, contained, as always, a number of items pertinent to the burgeoning property industry. Below, we provide a breakdown of those matters most important to our readers, which could materially change the way we all operate into 2014 and beyond.
Business Rates that are due in England and Wales for 2014/15 will be capped at 2% rather than being linked to the RPI inflation figure. It was also announced that the doubling of the Small Business Rate Relief would be extended until April 2015. This will mean that approximately 360,000 of the smallest businesses will now receive 100% relief.
With regard to the retail sector, additional support would be offered through a business rate discount of up to £1000 in both 2014/15 and 2015/16 for retail properties with a rateable value of up to £50,000. This additional support will include pubs, restaurants, cafés and charity shops.
To help bring empty high street properties back into use, there will also be a 50% discount for 18 months on business rates; available for new occupants of previously empty premises. Although the relief is temporary, it will be granted to businesses moving into long-term empty retail premises on or after 1st April 2014 and on or before 31st March 2016.
Legislation will also be introduced, to take effect from 1st April 2014, which will allow business rate bills to be paid over 12 months rather than the current 10 months.
Individuals who are not resident in the UK are not liable to UK tax on gains, even on UK-located assets such as UK land and buildings or shares in British companies. Any change to this rule is argued as very risky, as it might drive away the foreign investors who have become a substantial part of the UK’s, and particularly London’s, purchaser pool.
However, the Chancellor has announced one specific and important change: from April 2015, non-UK resident individuals selling UK residential property will be subject to Capital Gains Tax on ‘future gains’. Presumably this means that the charge will apply to gains accruing after April 2015 and there will have to be an apportionment between exempt and taxable, where a property has been owned for some years before that date.
The sale of your only or main residence – your home – is usually exempt from CGT. This is so even if you can’t sell your old house immediately, so for a time you are living somewhere else.
In recent years, the last 3 years of ownership have remained exempt after you have moved out – even if you moved out years ago and the house has been rented to tenants. From April 2014, this 3 year period will be cut to 18 months. This should not affect most normal house moves, but will increase the tax charge on some former houses which are now investment properties.
In a change that has gone almost un-noticed, the Government also extended the so-far successful Energy Companies Obligation scheme to March 2017, from its previous deadline of March 2015. That means that, although the emissions reduction targets haven’t been reduced, the short-term investment levels are expected to decline as Energy Suppliers seek to spread their costs across the whole 4 year period.
It remains to be seen what impact this will actually have on both energy bills and the number of insulation installations achieved under the ECO programme. Particularly as Ofgem, the administration body for the scheme, has recently changed the way approvals under ECO function; potentially adding greatly to the costs and project times of the installers.
Other interesting changes potentially affecting us all
The Chancellor has confirmed that a measure of relief for married couples will be reintroduced from April 2015. A married or registered couple, where neither pays tax above the basic rate, will be able to transfer up to £1,000 of personal allowance between them. Because it is not available where either partner pays at 40% income tax; the maximum benefit of this will be a tax reduction of £200 – ie. where one has income at least £1,000 below the personal allowance, and the other pays tax at 20%. Although this is a first step in a positive direction, it is at the most recognition of married status, rather than a significant amount of money that might change people’s behaviour.
As usual, the amounts that can be invested in tax-favoured ISAs, junior ISAs and Child Trust Funds will increase from April 2014 in line with inflation. The main ISA limit goes up from £11,520 to £11,880. As announced last year, the annual limit for contributions to tax favoured pension schemes will fall from £50,000 in 2013/14 to £40,000 in 2014/15. Unused limits of the last 3 years may justify extra contributions.
In this statement, George lumped together ‘avoidance, evasion, fraud and error’ as four related problems that would be tackled by ‘the largest package of measures so far this Parliament’, with the intention of bringing in £9 billion over the next five years. One of the main points in this package is a proposal that taxpayers who use tax avoidance schemes, and then have to defend them in the Tax Tribunal, should have to pay the tax upfront if someone else has lost a case in relation to a similar scheme.
The above is only a brief breakdown of some of the pertinent items raised by Mr Osborne in his Statement. A full breakdown of how these affect you will no doubt be available from your accountant and we sincerely thank Davisons Accountants of South Molton for their contributions to this article.