Reaction to Budget 2015 – Real Estate Tax Update

Chancellor George Osborne MP delivered his sixth and final Budget statement of this parliament today, Wednesday 18th March 2015.  Contrary to expectations, it was not filled with pre-election ‘give-aways’ but focussed on infrastructure and growth, whilst continuing pursuit of tax abuse, but aligning this with further tax simplification too.

E³ Consulting highlights here the key Property & Construction aspects – we hope you find it useful (where applicable references relate to the Budget Red Book) – but do contact us to discuss any matters that might affect you or your projects in greater detail.

Enhanced capital allowances – energy saving and water efficient technologies schemes will get a boost estimated by Government to be £40m 

over the next four years from the annual update in Summer 2015 (typically published in Aug/Sept)

• To adopt the Waste Heat to Electricity sub-technology, and
• To remove the Packaged Chillers sub-technology.

 In addition, the qualifying criteria for some sub-technologies in both schemes will be amended.  The government intends to make these changes by Treasury Order in summer 2015, subject to State aid approval.  See 2.175 later.

 Teasingly the Chancellor said the Annual Investment Allowance (AIA) would not revert to the £25,000 from 1^st January 2016 but only hinted at the future amount as being “set at a more generous rate”. 

It is not clear if this is “more generous” than the proposed £25,000 or the current £500,000!  

The British Chambers of Chambers of Commerce, CBI and IoD have all called for the AIAs to remain in place at either £500,000 or increased to £1,000,000.  As with all tax incentives, for them to truly have the desired impact they must have a degree of longevity to enable tax-payers to plan and implement their investments.  We look forward to seeing the Governments further announcements on AIAs and expect the figure may be increased to £1m from January 2016.  

Increasing the AIAs to £1m will effectively ensure businesses spending up to £4m per annum should get most, if not all the relevant qualifying expenditure as 100% in the year incurred.  Great opportunity for SME businesses to accelerate their investment, but it is time to see AIAs set out for a five year, or longer, time frame rather than frequent changes over the last few years. 

Our detailed review is available from the side panel.