Budget March 2020: Real Estate Summary

Business Rates

• Business rates review: Announcement of the launch of a fundamental review of business rates, due to report in autumn 2020;
• Small businesses retail discount: Business rates retail discount to be increased from 50% to 100% for 2020-2021 to support small businesses with a rateable value under £51,000 affected by COVID-19. This is part of a package of "extraordinary" measures to support the UK economy in the face of disruption from the COVID-19 outbreak;
• Leisure and hospitality sectors: Expansion of business rates retail discount to the leisure and hospitality sectors (e.g. shops, cinemas and music venues). These are temporary measures, but taken together with existing small business rates relief, and, according to the government mean, "that around 900,000 properties, or 45% of all properties in England, will receive 100% business rates relief in 2020-21". The announcement has been welcomed by many as extremely good news for small businesses to help with liquidity issues to see them through the worst of COVID-19 on the basis that it should not be a long-term issue. One issue to bear in mind is that the increase in rates relief may potentially leave businesses falling foul of EU state aid caps: whether this will no longer matter in December following the UK's departure from the EU is debatable;
• Retail discount government guidance: The current government guidance on business rates retail discount which applies in England only is here;
• Public house discount: Business rates discount for pubs with a rateable value below £1,000 in England to rise from £1,000 to £5,000 from 1 April 2020 (to support pubs in response to COVID-19);
• Devolution Deal areas: Increased business rates retention in Devolution Deal areas and the Greater London Authority. In 2017-18, the government set up 100% Business Rates Retention pilots in Devolution Deal areas: Cornwall, Greater Manchester, Liverpool City Region, West of England and West Midlands. London has also benefitted from increased retention arrangements from 2017-18. These areas will continue to benefit from increased retention, and London will receive 67% retention in 2020-21, in line with the Greater London Authority funding agreement made in 2017-18;
• Valuation Office Agency (VOA) business systems transformation programme. The government will invest an additional £11.5 million in the VOA in 2020-21 to support the modernisation of VOA systems and processes, to increase efficiency and improve customer service in the future.

Small Business Grant Funding

• Small business funding: The provision of £2.2 billion of funding for local authorities in England to support small businesses which pay little or no business rates because of Small Business Rates Relief (SBRR);
• SBRR or Rural Rate Relief funding: The government to provide £3,000 to around 700,000 business currently eligible for SBRR or Rural Rate Relief, to help meet their ongoing business costs (for a property with a rateable value of £12,000, this is one-quarter of its rateable value, or comparable to 3 months of rent). As most properties that are eligible for SBRR will have a lower rateable value, this will represent an even greater proportion of the annual rent.

SDLT

• Non-UK resident Stamp Duty Land Tax (SDLT) surcharge: The government to introduce a 2% SDLT surcharge on non-UK residents (the Budget does not discriminate between companies and individual purchasers but we are waiting for legislation to see if there are any differences in treatment) purchasing residential property in England and Northern Ireland from 1 April 2021;
• Government aims: The aim is to control house price inflation and to support UK residents to get onto and move up the housing ladder. The money raised from the surcharge will be used to help address rough sleeping;
• Housing co-operatives: Annual Tax on Enveloped Dwellings (ATED) and Stamp Duty Land Tax (SDLT): To make the taxation of housing co-operatives fairer, the government is to introduce a relief for qualifying housing co-operatives from the ATED and the 15% flat rates of SDLT on purchases of dwellings over £500,000;
• SDLT Relief: The SDLT relief in England and Northern Ireland will take effect from Autumn Budget 2020 and the UK-wide ATED relief from 1 April 2021 with a refund available for 2020-21.

Capital Allowances

• Structures and buildings allowance (SBA) rate: The annual rate of capital allowances available for qualifying investments to construct new, or renovate old, non-residential structures and buildings will increase from 2% to 3%;
• Timescale: The change will take effect from 1 April 2020 for corporation tax and 6 April 2020 for income tax;
• Government commentary: According to the government, "the introduction of SBA at Budget 2018 greatly enhanced the international competitiveness of the UK’s tax system and this increased rate of relief goes even further, providing businesses who invest with over £1 billion in additional relief by the end of 2024-25."

Retail Prices Index Consultation (RPI)

• RPI consultation: Government and UK Statistics Authority's (UKSA) launch of the consultation on UKSA’s proposal to address the shortcomings of the RPI measure of inflation;
• Timescale: The consultation is open for six weeks and closes on 22 April 2020. The government and UKSA to respond to the consultation before the Parliamentary summer recess.

Coronavirus Business Interruption Loan Scheme

• Coronavirus Business Interruption Loan Scheme: Launch of a new, temporary Coronavirus Business Interruption Loan Scheme (to be delivered by the British Business Bank), to support businesses to access bank lending and overdrafts; 
• Government guarantee: The government to provide lenders with a guarantee of 80% on each loan (subject to a per lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs; 
• Loan value: The government will not charge businesses or banks for the guarantee, and the Scheme will support loans of up to £1.2 million in value. The new guarantee will initially support up to £1 billion of lending on top of current support offered through the British Business Bank.

Planning

• Simpler planning system: The Secretary of State for Housing, Communities and Local Government to announce comprehensive reforms to bring the planning system into the 21st century, followed by a Planning White Paper in the Spring;
• Local Planning Authorities: Plans to improve the capacity, capability and performance of Local Planning Authorities (LPAs) to accelerate the development process. Firmer consequences proposed where LPAs fail to meet their local housing need, including a stricter approach taken to the release of land for development and greater government intervention;
• Planning system reforms: The government to explore long-term reforms to the planning system, rethinking planning from first principles, to ensure the system is providing more certainty to the public, LPAs and developers.

Improving Local Services And Infrastructure

• Public Works Loan Board consultation: The government assists local authorities who invest capital finance in local communities by offering low cost loans through the Public Works Loan Board (PWLB). The government to consult on revising the terms of PWLB lending to ensure LAs continue to invest in housing, infrastructure, and front-line services;
• Social housing interest rate cut: The government to cut interest rates for investment in social housing by 1 percentage point to enable high quality investment by local authorities and make an extra £1.15 billion of discounted loans available for local infrastructure projects;
• National Infrastructure Strategy: Publication of a landmark National Infrastructure Strategy later in the Spring which will set out plans for a once in a generation transformation of the UK’s economic infrastructure.

Strategic Transport Projects

• Roads investment: Transforming regional connections through an investment in English strategic roads with over £27 billion between 2020 and 2025 (enough funding to fill in around 50 million potholes!);
• Road Investment Strategy: The second Road Investment Strategy (RIS2) will spend over £27 billion between 2020 and 2025. It will take forward schemes such as dualling the A66 Trans-Pennine and upgrading the A46 Newark bypass to address congestion, and building the Lower Thames Crossing to increase road capacity across the Thames east of London by 90%. RIS2 to be delivered alongside the government’s plans for decarbonising the transport sector;
• Midlands Rail Hub: Investment of £20 million to develop the Midlands Rail Hub, progressing plans for a major programme of improvements to rail services across these regions.

Local Transport

• Building on the Transforming Cities Fund: The government to provide £4.2 billion from 2022-23 for five-year funding settlements for eight Mayoral Combined Authorities (in West Yorkshire, Greater Manchester, West Midlands, Liverpool City Region, Tyne and Wear, West of England, Sheffield City Region and Tees Valley;
• Government welcomes the opportunity to support a range of schemes, such as the renewal of the Sheffield Supertram, the development of a modern, low-carbon metro network for West Yorkshire and tram-train pilots in Greater Manchester. As a first step, the government will open discussions with Greater Manchester, Liverpool City Region and the West Midlands in the coming months. Elected mayors to put forward plans.

Digital Connectivity

• Gigabit broadband: Government commitment of £5 billion to support the rollout of gigabit-capable broadband in the most difficult to reach 20% of the country to level up connectivity across the UK, particularly in rural areas;
• New build homes connectivity: consultation response to be launched which will confirm the government’s intention to legislate to ensure that new build homes are built with gigabit-capable broadband;
• Announcement of the next seven areas that have successfully bid for funding from the third wave of the Local Full Fibre Networks Challenge Fund: North of Tyne (£12 million), South Wales (£12 million), Tay Cities (£6.7 million), Pembrokeshire (£4 million), Plymouth (£3 million), Essex and Hertfordshire (£2.1 million) and East Riding of Yorkshire (£1 million);
• Shared Rural Network: Announcement that the Shared Rural Network agreement has been finalised between the government and industry to improve mobile connectivity and a choice of network. The government to commit up to £510 million of funding, which will be more than matched by industry. According to the government, "this means 95% of the UK’s landmass will have high quality 4G mobile coverage by 2025".

Flooding

• Flood defences: £5.2 billion investment in flood defences over six years to better protect a further 336,000 homes and non-residential properties.

Housing

• New homes commitment: Government commitment to creating at least 1 million new homes in England by the end of this Parliament and an average of 300,000 homes a year by the mid 2020s;
• Affordable Homes Programme: £12.2 billion for the Affordable Homes Programme;
• Housing Infrastructure Fund: Confirmation of allocations from the Housing Infrastructure Fund totalling £1.1 billion for nine different areas including Manchester, South Sunderland and South Lancaster;
• Single Housing Infrastructure Fund: Government to launch a new long-term Single Housing Infrastructure Fund to unlock new homes in areas of high demand across the country by funding the provision of strategic infrastructure and assembling land for development;
• Brownfield Housing Fund: launch of a new £400 million brownfield fund for pro-development councils and ambitious Mayoral Combined Authorities with the aim of creating more homes by bringing more brownfield land into development;
• Brownfield land development: Government to shortly invite bids for an increase in housing supply on brownfield land and to consider proposals from areas such as the West Midlands Combined Authority to expand their existing brownfield land fund;
• Future Homes Standard; reiteration of the government's commitment to reducing emissions from homes and to helping keep household energy costs low now and in the future. The government will announce plans to improve the standards of new built homes;
• • Building Safety Fund: Following the Grenfell tragedy, an additional £1 billion to remove unsafe cladding from residential buildings above 18 meters to ensure people feel safe in their homes.

Growth Across The Country

• High street regeneration: The government has already set up the £3.6 billion Towns Fund to support the regeneration of high streets, town centres and local economies;
• Ports: The government launched a consultation in February 2020 on creating up to 10 new Freeports as major hubs for trade, innovation and commerce. The consultation addresses the allocation and governance of Freeports in England only; it refers to working with devolved governments on the establishment of Freeports in Scotland, Wales and Northern Ireland;
• English Devolution White Paper: This will be published in the summer, setting out how the government intends to meet its ambition for full devolution across England;
• West Yorkshire Devolution Deal: The government has agreed a devolution deal with West Yorkshire to establish a Mayoral Combined Authority with a directly-elected Mayor from May 2021. This deal will provide £1.1 billion of investment for the area over 30 years, as well as devolving significant new decision-making powers on transport, planning and skills. It also underpins the agreement of a long-term intra-city transport settlement for the region starting in 2022-23. This devolution deal is an important step in delivering on the government's levelling up agenda by giving power and investment to local areas;
• Bradford regeneration: As part of the devolution deal, the government is providing up to £500,000 to support Bradford in its regeneration and development plans to increase the benefits of potential Northern Powerhouse Rail connections

Growing A Greener Economy

• Climate measures: The Budget sets out ambitious action on tree planting, ultra-low emission vehicles, heat decarbonisation and carbon capture and storage. Further climate policy measures to follow in the coming months;
• Zero carbon: Government recognition that the heating of homes will need to be virtually zero carbon by 2050, replacing natural gas and other fossil fuels with low carbon alternatives – likely to be primarily a mix of green gas, heat pumps and heat networks;
• Green Gas Levy: To meet the zero carbon challenge, the introduction of a new support scheme for biomethane, funded by a Green Gas Levy to accelerate the greening of the grass grid;
• Low Carbon Heat Support Scheme: The introduction of a Low Carbon Heat Support Scheme to support the installation of heat pumps and biomass boilers;
• Heat Networks Investment Project: Confirmation of funding for the Heat Networks Investment Project for a further year to 2022 and provision of £270 million of new funding to enable new and existing heat networks to adopt low carbon heat sources;
• Electric vehicles (EVs): Government acknowledgment that access to high quality, convenient charging infrastructure is critical for drivers to make the switch to EVs confidently;
• Fast- charging network: Government providing £500 million over the next five years to support the rollout of a fast-charging network for electric vehicles, ensuring that drivers will never be further than 30 miles from a rapid charging station;
• Rapid Charging Fund (RCF) to help businesses with the cost of connecting fast charge points to the electricity grid;
• EV charging structure review: The Office for Low Emission Vehicles will complete a comprehensive electric vehicle charging infrastructure review to target spending from the RCF effectively;
• Plug- in Car and Van Grant: Extension of Plug-in Car and Van grant to 2022-23;

HM Land Registry (HMLR)

• HMLR investment: HMLR to be provided with £392 million to transition from a Trading Fund into part of central government;
• Digitisation: This funding includes £350 million that will be offset by HMLR returning its income to the Exchequer, and £42 million of funding to allow HMLR to continue with its ongoing project to digitise land registration in England and Wales, and enable further innovation in the property market and the wider UK economy.

Asset Management Funds

• Consultation launch: The government has launched a consultation on the tax treatment of asset holding companies in alternative fund structures which runs until 20 May 2020;
• Considerations: The review will consider taxation and relevant areas of regulation to ensure the ongoing competitiveness and sustainability of the UK regime as it applies to a fundamental area of the financial services sector;
• Scope: The consultation will cover and review a number of different areas, including; VAT on management fees, potentially broadening the availability of SSE for institutional investors, expanding the REIT regime, and reducing the administrative process for making treaty claims in relation to withholding taxes.

Energy And Environmental Tax

• Plastic Packaging Tax to be introduced from April 2022 to incentivise the use of recycled plastic in packaging;
• Rate: The Budget sets the rate at £200 per tonne of plastic packaging that contains less than 30% recycled plastic;
• Scope: It will apply to the production and importation of plastic packaging. The government will keep the level of the rate and threshold under review to ensure that the tax remains effective in increasing the use of recycled plastic.