Property professionals unpick the Budget

Labour’s first budget in 14 years brought large tax rises, increased borrowing and the promise of investment in public services.  Once Alun Oliver had examined the fine print of the released budget documents, he delivered E³ Consulting’s considered verdict on the changes that lie ahead to an audience of property specialists at the Bournemouth Property Association (BPA) breakfast seminar on 12 November 2024.

A packed conference room at the Vitality Stadium also heard comment and analysis from Shaun Pettitt, MD of Wyatt Homes, and Cathy Revis, Head of Tax at Fiander Tovell LLP.

Alun said Chancellor Rachel Reeves delivered a mixture of measures:

“It’s a major hit to all kinds of businesses, especially retail, rural, leisure and hospitality, with the triple whammy of business rates, increases in minimum wage and employers’ national insurance contributions.  That’s likely to affect the Government’s ambition for growth, growth, growth but there’s also some positive news.  We heard about expansion at existing Freeports with a new investment zone in the East Midlands and potential benefits for the property sector with brownfield and grey belt opportunities.  However, the devil will always be in the detail – it is worth noting that, save for capital gains and stamp duty, the changes discussed are subject to legislation being brought into effect.”

Fiander Tovell’s Head of Tax, Cathy Revis, predicted the road ahead could be bumpy: “In the short-term, there’s likely to be a few business failures and a slowdown in investment and we’ve already seen some reports of that in the media.  We don’t know how long this shrinkage will last, how deep it will be and its effects on the business economy.  But, taking into account the increase in Government spending, it’s very unlikely there will be a recession.”

She warned: “All business and property owners need to review their structures and plans for the future to see if they are fit for purpose, given the major changes announced in the Budget.  Talk to your advisers now, rather than later.”

This sentiment was echoed by Alun throughout his update – stating that timely tax advice generally has wider mitigation opportunities, before timelines on reliefs expire.  There remain many other opportunities through existing property tax reliefs that might not have otherwise been explored or fully claimed.

From a housebuilders’ perspective, Shaun Pettitt at Wyatt said customer confidence is key: “We need a steady and predictable trading environment and a stable supply of prospective purchasers.  Key to the housing market are the fundamentals of an availability of affordable finance, consumer demand, and high employment.

“It will be interesting to see how the taxation changes affect confidence, but we may see that they may prompt the release of land for development.  We were pleased to hear of an extra £500million for the affordable homes programme, a new method for the Government to calculate housing requirements to deliver the 1.5million homes promised in this Parliament, and £50million for councils to recruit more planners.”

“There have been plenty of challenges recently, but we are quietly confident 2025 could offer modest growth in sales revenues.”

Looking ahead, E³ Consulting believes it is now more important than ever to take full advantage of Capital Allowances (CAs) to optimise any tax savings and help boost cashflows.  Spring 2025 will bring a new consultation on CAs, following an on-going £50m dispute between HMRC and the taxpayers that built and operate the offshore wind farm at Gunfleet Sands.  Alun also sits on the Property Taxes committee, of the Chartered Institute of Tax (CIOT) and contributes his property tax expertise to respond to Government and policy announcements.  Over the last 18 months he has been in dialogue with HMRC and HM Treasury, on brownfield regeneration and Land Remediation Tax Relief (LRTR) – that will also be subject to a Consultation next Spring – as the Government seeks to ensure tax legislation remains competitive, up to date and supports wider policy around regeneration and housing growth.

E³ Consulting will be watching for more detailed Government announcements on ‘brownfield passports’ to support development plans for urban areas such as lorry parks and the much-trailed ‘grey belt’ proposals for poor quality green belt land to be brough back into economic use and underpin future growth, resilience and prosperity.

Whilst not within the Budget announcements, the ‘planning tax’ known as Community Infrastructure Levy (CIL) remains a complicated and contentious area for many homeowners and developers, with frequent enquiries into E³ Consulting each and every week.  Alun highlighted the cost of simply accepting the Local Planning Authorities (LPAs) numbers and how there is often scope to make substantial savings.  Challenging the CIL amount relies upon the project data being accurate, and any adjustment to the LPA figures must be made promptly, ideally within the timescales set out in the Regulations and before work starts.  However, changes may lie ahead for this tax too.  A technical consultation on the Infrastructure Levy for England (excluding London and announced by the previous Government) closed in July 2023, and although Labour scrapped the proposed introduction of the new levy, any findings or changes could be incorporated in making the existing CIL process more easily manageable. Next year’s Planning and Infrastructure Bill might address these challenges in more detail.

“It’s ironic that successive governments keep talking about tax simplification when in reality they keep making it more and more complicated, often through changing the rules, or introducing new allowances with conflicting rules” commented Alun. “It’s now more important than ever to consult a specialist property tax adviser before making major decisions. 

“Take for example the widely acclaimed new Full Expensing for capital allowances, it is actually better risk management for most businesses to claim their existing Annual Investment Allowance on general pool assets than this new allowance because of the legislative burden created with different administration and disposal rules.”

The Bournemouth Property Association was founded in 2008 to bring property professionals together through insightful events and networking opportunities.  It is not-for-profit and attracts a range of members including architects, surveyors, developers, contractors, solicitors, managing agents, and other professionals and specialists within the property and construction industry.

“It’s important for our members to find out about external influences that will have a knock-on effect on their businesses.  What could be more important than a new Government’s first budget?” said BPA chairman, Dario Di-Felice.  “We had a strong turn-out for this seminar with three excellent speakers giving their views on the implications of these wide-reaching changes.  It has been very thought provoking, and further questions will no doubt arise, once people have digested what has been heard today.  We will be organising more events in 2025 to support our wide range of members, and to help them through the ever-changing business environment.”