2013 Autumn Statement: property implications

Practical Law UK Legal Update 6-551-0885 (Approx. 12 pages)

2013 Autumn Statement: property implications

2013 Autumn Statement

On 5 December 2013, the Chancellor of the Exchequer, George Osborne, delivered the Autumn Statement.

This update analyses the key implications for the property industry. For an analysis of other aspects of the Autumn Statement 2013, see Further reading.

Defined terms

The following defined terms are used in this update:

Autumn Statement 2013: HM Treasury: Autumn Statement 2013 (5 December 2013).
NIP 2013: HM Treasury: National Infrastructure Plan 2013 (December 2013).

Business rates

The government announced a number of proposals to assist businesses in England with the cost of business rates, with particular support for small businesses and the retail sector.

Indexation cap

The business rates increase will be capped at 2% for 1 year for all businesses, from 1 April 2014. Without this cap, the increase would otherwise have been 3.2% in line with the September 2013 Retail Prices Index.

(Autumn Statement 2013, paragraphs 1.159 and 2.101.)

Small business rate relief

The existing temporary increase in small business rate relief (SBRR), which is due to end in April 2014, will be further extended to April 2015. The government estimates that approximately 360,000 small businesses will continue to get 100% relief and another 180,000 will receive tapering relief.

The rules on SBRR will also be relaxed to incentivise the growth of business. Businesses will be able to keep receiving SBRR for 1 year, with effect from 1 April 2014, if they take on an additional property that would otherwise cause them to lose the relief.

(Autumn Statement 2013, paragraphs 1.160, 1.161, 2.104 and 2.105.)

Discount for retail premises

A business rates discount of up to £1,000 will be given in 2014-15 and 2015-16 to retail premises with a rateable value of up to £50,000. Eligible retail premises will include pubs, cafes, restaurants and charity shops but will exclude banks and betting offices. The government will issue guidance on how the discount will be applied.

(Autumn Statement 2013, paragraphs 1.162 and 2.102 and DCLG: Eric Pickles' letter to local authority leaders following Autumn Statement 2013 (5 December 2013).)

Reoccupation relief

A business rates discount of up to 50% will be given for 18 months to new occupants of retail premises which were previously empty for a year or more. The relief will apply to businesses moving into empty retail premises between 1 April 2014 and 31 March 2016.

(Autumn Statement 2013, paragraphs 1.162 and 2.103.)

Payment over 12 months

Businesses will be able to pay their rates in 12 monthly instalments, rather than in 10 instalments as at present. The change will take effect from 1 April 2014.

(Autumn Statement 2013, paragraphs 1.165 and 2.106.)

Appeals process

The government announced a commitment to clear 95% of the backlog of valuation appeals by July 2015.

It also issued a consultation paper, which sets out the government's proposals to improve transparency in the business rates valuation and formal challenge system (see DCLG: Checking and challenging your rateable value (5 December 2013)). The consultation closes on 3 March 2014.

(Autumn Statement 2013, paragraphs 1.165 and 2.107.)

Long term administrative reform

The government intends to publish a discussion paper in spring 2014 on different options for longer term reforms to business rates administration to take effect from the 2017 revaluation.

(Autumn Statement 2013, paragraphs 1.165 and 2.108.)

Business premises renovation allowance

The government carried out a review of the business premises renovation allowance in the summer of 2013 (see Legal update, Technical review of business premises renovation allowances announced). The government intends to simplify the scheme, with effect from April 2014. The measures will be included in the Finance Bill 2014.

(Autumn Statement 2013, paragraph 2.117.)

SDLT: charities relief on joint purchases with non-charities

The Finance Bill 2014 will include a provision to make it clear that, when a property is purchased jointly by a charity and a non-charity, the charity can claim relief from stamp duty land tax (SDLT) on the proportion of the purchase attributable to it. It will take effect from the date the Finance Bill 2014 receives Royal Assent.

This codifies the Court of Appeal's decision in The Pollen Estate Trustee Company Ltd (1) King's College London (2) v HMRC [2013] EWCA Civ 753 (see Legal update, SDLT charities relief available "to the extent that" purchaser is charity (Court of Appeal)). In the meantime, HM Revenue & Customs (HMRC) has invited charities affected by this decision to claim back any overpaid SDLT (see Legal update, HMRC invites SDLT charity relief claims following Court of Appeal defeat).

(Autumn Statement 2013, paragraph 2.69.)

Energy and buildings

Energy Efficiency Measures and reduction in energy costs

The Autumn Statement 2013 confirms the announcements made earlier this week, relating to measures designed to reduce energy bills and/or encourage uptake of energy efficiency measures. For more details, see Legal update, Government announces streamlining and reform of the Green Deal. The measures include:

A rebate (paid from taxation) of £12 for domestic electricity customers for 2 years (subject to consultation).
A reduction in the effect on electricity bills of the Energy Companies Obligation (ECO). This scheme is intended to encourage the roll out, by major energy suppliers, of insulation packages for homes which are hard to heat. It is paid for by a levy on electricity bills. Changes are to be made to ECO, including the extension of the works that can be done under it and stretching out the compliance period to 2017. This should result in a deduction of £30-£35 from the average bill.
A reduction in electricity network costs, which savings will be passed down to customers.
The introduction of new energy efficiency grants for future homebuyers (of between £1000 and £4000 depending on the work done). This scheme is limited to 3 years. No further details are yet available.
An increase in the funds available to local authorities to help support energy efficiency works in their area organised through the Green Deal.
The extension of the Green Deal cashback system.
Allocation of £90m over 3 years on improving the energy efficiency of schools, hospitals and other public sector buildings. It is not clear whether this will be by way of loan or grant.
A review of the way that the Green Deal works for private rental landlords (which may require legislation). This is designed to help landlords bring their properties up to the minimum standards that are due to be introduced under the Energy Act 2011 (for more information, see Practice note, The Green Deal: Minimum EPC rating before being let). The Autumn Statement 2013 suggests (paragraph 2.38) that the government will introduce funding of £30m per year for 3 years which will be targeted at such landlords.
Changes to speed up the implementation of Green Deal plans.

(Autumn Statement 2013, paragraphs 1.256 to 1.261 and 2.35 to 2.39.)

CRC Energy Efficiency Scheme

The government announced that the price of allowances under the CRC Energy Efficiency Scheme (CRC) for 2014/15 will be:

£15.60 per tonne of carbon dioxide (t/CO2) in the (advance) forecast sale.
£16.40 t/CO2 in the (later) buy-to-comply sale.

(Autumn Statement 2013, paragraph 2.99.)

Shale gas: new tax allowance for onshore oil and gas

The Finance Bill 2014 will introduce a new tax allowance for the exploration of onshore oil and gas (including shale gas). The allowance, which applies from 5 December 2013 removes 75% of the capital expenditure that a company incurs in relation to an onshore oil or gas site from a company's adjusted ring fence profits that are subject to the 32% supplementary charge (see Legal update, 2013 Autumn Statement: environmental implications: Shale gas: new tax allowance for onshore oil and gas).

Homeowners

Council tax discount on annexes

The government announced a national council tax discount of 50% in respect of annexes, to take effect from April 2014. This follows on from the government's consultation, which closed in October 2013 (see Legal update, DCLG consults on national council tax discount for annexes)

The discount is intended to support extended families and to contribute towards the government's policy of increasing affordable housing.

(Autumn Statement 2013, paragraphs 1.277 and 2.43.)

Help to Buy

In the 2013 Budget, the government announced a package of financial support to tackle long-term problems in the residential property market. This included Help to Buy which comprises 2 schemes:

An equity loan scheme.
A mortgage guarantee scheme.

For more information, see Legal updates, 2013 Budget: property implications: Help to Buy: equity loan and mortgage guarantee and Help to Buy changes announced.

In the Autumn Statement 2013, the government announced that:

Since the launch of the equity loan scheme in April 2013, more than 18,000 reservations for new homes have been made and over 900 developers have registered to deliver the equity loan scheme.
Since the launch of the mortgage guarantee scheme on 8 October 2013, over 2,000 people have submitted mortgage applications to lenders for a total of £365 million of new mortgage lending and more than 65% of the mortgage market have agreed to participate in the mortgage guarantee scheme.
The Bank of England’s Financial Policy Committee (FPC) will evaluate the impact of the mortgage guarantee scheme. In particular, the FPC are to advise on whether the main parameters of the mortgage guarantee scheme (that is, the price cap and the fees charged to lenders) are still appropriate.

(Autumn Statement 2013, paragraphs 1.40-1.42 and paragraph 1.225.)

In his speech, the Chancellor also announced that Aldermore and Virgin are expected to join the mortgage guarantee scheme in December 2013.

CGT principal private residence relief: final period exemption

The government announced that from 6 April 2014, the final period exemption for principal private residence relief (PPR) from capital gain tax (CGT) will be halved from 3 years to 18 months (Autumn Statement 2013, paragraph 2.58).

The government's stated aim is to reduce the incentive for those with multiple homes to exploit the rules (Autumn Statement 2013, paragraph 1.295).

Currently, relief is always available in the last 3 years of ownership provided the dwelling house was the individual's only or main residence at some point during their period of ownership. This is the case even if the dwelling is no longer the individual's only or main residence in those last 3 years.

For more information about PPR, see Practice note, Capital gains tax: principal private residence relief: overview.

CGT on disposal of UK residential property by non-UK residents

The government announced that with effect from April 2015 it will introduce CGT on future gains made on the disposal of either of the following:

UK residential property owned by non-UK resident individuals.
Enveloped UK residential property with a value of under £2 million owned by non-UK residents.

At present, subject to certain anti-avoidance rules, non-resident individuals do not pay CGT on a disposal of UK residential property. Non-resident corporate entities disposing of UK residential property worth £2 million or more were the subject of a new CGT charge introduced in the Finance Act 2013 (see Practice note, Capital gains tax charge relating to annual tax on enveloped dwellings (ATED)).

In early 2014, the government will publish a consultation on how best to introduce this CGT charge.

(Autumn Statement 2013, paragraphs 1.295 and 2.59 and HM Treasury: Autumn Statement 2013: policy costings (5 December 2013), page 33.)

Housing

Affordable Housing

The government is committed to meeting demand and supporting home ownership while ensuring market stability. It plans to increase the funding available for new affordable homes by:

Raising the borrowing limits on local authorities' housing revenue accounts by £150 million in 2015-16 and by £150 million in 2016-17.
The sale of vacant high-value social housing.

The funding should support an additional 10,000 affordable homes. It will form part of the Local Growth Fund, available to local authorities that have a proposal agreed by their Local Enterprise Partnership. Priority will be given to bids that deliver value for money. Bids can include public sector land and the expectation is that disposal of high value vacant stock will promote competitive bids. Local authorities will be required to be transparent over the value and size of their housing stock.

(Autumn Statement 2013, paragraphs 1.43, 1.150, 1.228 and 2.19.)

Large housing developments

The government will issue £1 billion in loans through a six-year programme targeted at infrastructure to support large housing developments. The programme will commence in 2014-15 with investment decisions being issued on nine sites capable of delivering 27,000 homes. Overall, the programme could provide about 250,000 homes.

(Autumn Statement 2013, paragraphs 1.43, 1.227 and 2.18.)

New Homes Bonus

A review of the New Homes Bonus will be completed at Easter 2014. The government will consult on proposals to improve the incentives that the New Homes Bonus has provided. Particular consideration will be given to mechanisms to withhold payments where planning approvals are given on appeal. Outside of London, the New Homes Bonus will not be pooled with the Local Growth Fund. For more information on the New Homes Bonus, see Legal update, New Homes Bonus: final scheme design and provisional allocations published.

(Autumn Statement 2013, paragraphs 1.226, 1.230 and 2.20.)

Housing Estate Regeneration

The government will explore options for regeneration, through repayable loans, of some of the most deprived housing estates. In addition to boosting the supply of housing locally, regeneration would overhaul a blighted area and help to re-establish an active community.

(Autumn Statement 2013, paragraphs 1.234 and 2.22.)

Right to Buy

Additional support for Right to Buy will be provided through the introduction of Right to Buy agents that will help buyers through the acquisition procedure. A £100 million fund will be established for Right to Buy sales, to improve applicants' access to mortgage finance.

(Autumn Statement 2013, paragraphs 1.233 and 2.21.)

Right to Move

Those in social housing generally have limited choices. The government will consult on options for local authority tenants to have a right to move, if they wish to relocate for employment reasons.

(Autumn Statement 2013, paragraphs 1.234 and 2.23.)

Local authority housing role

The government plans a review of the role of local authorities in supporting housing supply of all designations.

(Autumn Statement 2013, paragraphs 1.229 and 2.25.)

National Infrastructure Plan 2013

On 4 December 2013, the government published a new National Infrastructure Plan (NIP 2013) setting out the government's long-term plan for investment in the UK's infrastructure (see HM Treasury: National Infrastructure Plan 2013 (December 2013)). NIP 2013 replaces the original plan which was published in 2010 and updated in 2011 and 2012. For more information, see Practice note, National Infrastructure Plans: construction, environment and property implications.

NIP 2013 sets out further planning reforms to speed up the delivery of public and private infrastructure including:

The introduction of a specialist planning court to tackle delays to infrastructure delivery. This new court will be established in early 2014 to accelerate the handling of cases.
An overarching review of the Nationally Significant Infrastructure Planning (NSIP) regime. The review will look at ways to shorten the pre-application phase and further ways to streamline the consenting process. For information about the current regime, see Practice note, Planning Act 2008: planning applications for nationally significant infrastructure projects).
The publication of a national networks national policy statement (see Legal update, Government consults on draft National Policy Statement for the National Road and Rail Networks).

(Autumn Statement 2013, paragraph 1.220.)

The government announced it will freeze planning application fees for NSIPs for the remainder of this Parliament (Autumn Statement 2013, paragraph 2.193).

In NIP 2013, the government identifies the top-40 priority investments for infrastructure. The government will ensure, where possible, that these projects can use the NSIP planning regime (Autumn Statement 2013, paragraph 2.194).

The following aspects of NIP 2013 may also be of particular interest to property law practitioners:

Flooding and coastal erosion. NIP 2013 highlights a number of existing and future projects to alleviate flood risks and coastal erosion.
Asset sales. NIP 2013 identifies further assets with the potential for sale which may include the property assets of London and Continental Railways.
Northern Line Extension Agreement. The government and the Greater London Authority (GLA) have agreed the terms of a support package to enable the extension of the Northern Line to Battersea Power Station. This will involve a loan of up to £1 billion from the Public Works Loan Board (PWLB) to the GLA, the creation of a 25-year Enterprise Zone in Wandsworth and Lambeth and a UK Guarantee facility to support repayment of the loan.
Wylfa nuclear plant. NIP 2013 highlights progress on the UK Guarantees Scheme including progress towards a UK Guarantee for a new nuclear power plant at Wylfa (see Legal update, National Infrastructure Plan 2013: environmental aspects: Nuclear power plant at Wylfa).
Superfast broadband. A £10 million competitive fund will be established in 2014 to market test delivery of superfast broadband services to the most difficult areas of the UK. This investment extends the £250 million allocated to the extension of superfast broadband provision at Spending Round 2013.

(Autumn Statement 2013, paragraphs 1.216-1.221.)

Planning reform

In the Autumn Statement 2011, the UK's planning and consent regime was identified as a major reason for infrastructure being more expensive to build in the UK compared with other European countries. The regimes were also blamed for causing significant delays. In the Autumn Statement 2013, the government continues its aim to streamline the planning system to make the UK a good place for businesses to invest and expand.

Housing

The government is committed to increasing the supply of housing and announced it will take the following steps to improve performance and reduce costs for developers:

Consult on measures to improve plan making, including a statutory requirement to put a local plan in place.
Legislate to treat planning conditions as approved where a planning authority has failed to discharge a condition on time.
Strengthen the requirement for planning authorities to justify planning conditions that must be discharged before development commences.
Consult on proposals to reduce unnecessary statutory consultations.
Allow developers to make planning applications directly to the Department for Communities and Local Government (DCLG) where a planning authority makes fewer than 40% of its decisions on time. Currently a planning authority can be placed in special measures if it determines 30% or fewer major applications on time (see Legal update, DCLG announce criteria for putting local planning authorities into special measures.)
Consult on a new 10-unit threshold for section 106 affordable housing contributions. This should reduce costs for smaller buildings.

(Autumn Statement 2013, paragraph 1.226.)

The government announced it will consult on measures to improve the incentive of the New Homes Bonus (see New Homes Bonus). This could include withholding payments where local authorities have refused planning permission which is then granted on appeal.

(Autumn Statement 2013, paragraph 2.209.)

Changes to permitted development

The Secretary of State may, by development order, grant deemed planning permission for specified development or classes of development (section 59(1), TCPA 1990). The Town and Country Planning (General Permitted Development) Order 1995 (SI 1995/418) (GPDO 1995) is effectively a national grant of planning permission. Schedule 2 to the GPDO 1995, grants planning permission for certain development described as "permitted development".

The government announced that it will consult on liberalising:

Changes of use from retail (class A1) of the Town and Country Planning (Use Classes) Order 1987 (SI 1987/764) (UCO 1987) to restaurant (class A3) or assembly and leisure uses (class D2).
Planning restrictions on mezzanine floors in retail premises.

(Autumn Statement 2013, paragraph 2.204.)

Development benefits

The government announced that it wants to ensure that households benefit from development in their local area. The government intends to work with industry, local authorities and other interested parties to develop a pilot for passing a share of the benefits of development directly to individual households.

(Autumn Statement 2013, paragraph 2.210.)

Real Estate Investment Trusts (REITs)

The government confirmed that from 1 April 2014, the definition of "institutional investor" will include a real estate investment trust (REIT). The government had consulted on this proposal from 20 March to 14 June 2013 (see Legal update, Informal consultation on extending "institutional investor" definition to include REITs).

(Autumn Statement 2013, paragraph 2.109.)

Agriculture: rural fuel rebate

The government extended the time allowed for rural retailers to apply for the rural fuel rebate scheme, to ensure that as many areas as possible have the chance to qualify for the scheme. The 4-week extension ends on 6 December 2013.

The current rural fuel scheme came into effect in March 2012 and allows retailers of road fuel within the Inner and Outer Hebrides, the Northern Isles, the Islands of the Clyde and the Isles of Scilly to register with HMRC to claim back 5 pence per litre relief on unleaded petrol and diesel for retail sale within the eligible areas.

In the 2012 Autumn Statement the government announced it was considering whether to seek EU approval for an extension of the current scheme to other remote parts of the UK. Last month the UK made an initial announcement to extend the rural fuel rebate scheme to 10 new towns, 3 in England (Kirkby-in-Furness in Cumbria, Lynton in Devon and Hawes in North Yorkshire) and 7 further towns in Scotland. An application for the extension will be made to the European Commission in January 2014. For details on the Fuel Rebate scheme, see Legal update, Tax news round-up to 22 October 2013.

(Autumn Statement 2013, paragraph 2.93.)

2013 Autumn Statement: property implications | Practical Law