2011 Budget: property implications

Practical Law UK Legal Update 8-505-3353 (Approx. 21 pages)

2011 Budget: property implications

by PLC Property

"Made in Britain...": a budget for growth

"We want the words, "Made in Britain, created in Britain, designed in Britain, invented in Britain", to drive our nation forward".

On 23 March 2011, the Chancellor of the Exchequer, George Osborne, delivered a budget "to re-build the British economy" and realise the government's economic policy objective, "to achieve strong, sustainable and balanced growth that is more evenly shared across the country and between industries".

Alongside Budget 2011, the government published, HM Treasury: The Plan for Growth (March 2011), which sets out reforms in areas that act as barriers to enterprise.

This update covers the main proposals in the Budget 2011 and Plan for Growth affecting the property industry. For information on other aspects of the 2011 Budget, see:

PLC Coverage: 2011 Budget
2011 Budget: key business tax announcements.
2011 Budget: construction industry implications.
2011 Budget: environmental announcements.
2011 Budget: key private client tax announcements.

Defined terms

The following defined terms are used in this update:

Budget Report: Budget 2011, HM Treasury.
FA 2003: Finance Act 2003.
HMRC: HM Revenue & Customs.
Overview: Overview of Tax Legislation and Rates.
SDLT: Stamp duty land tax.
TIIN: Tax information and impact note (Overview, Annex A).

Planning

The planning system in the UK is cumbersome, slow, expensive and bureaucratic. The government believes that faults with the existing planning system have:

Failed to encourage the use of land for development.
Restricted economic growth.
Hindered the creation of jobs.
Prevented the construction of new homes.
Hampered new businesses and business expansion.

To address these concerns the government has announced measures to:

Remove bureaucracy from the system.
Decrease planning costs.
Give local communities the incentives to promote development.
Streamline the planning process.

The details are found predominantly in the Budget Report, paras 1.82 to 1.83, Planning reform, page 29 and The Plan for Growth, paras 2.4 to 2.38, part 2, Growth review measures, Planning, pages 41 to 49 (which reiterates measures that the government is already implementing).

Presumption in favour of sustainable development

The government wants to kick-start property development and growth.

Underpinning many of the announcements of the new approach to planning in the 2011 Budget is the introduction of a presumption in favour of sustainable development. The result of this will be that a default answer of 'yes' will be given to planning applications that comply with up-to-date planning policies at a national and local level. The only situation where the presumption in favour of planning permission will not apply, is if the development proposals contravene the key sustainable development principles set out in the national planning policy.

The government will publish details of the presumption in favour of sustainable development in May 2011, including how it will be integrated into national planning policy.

(See Budget Report, para 1.82 and The Plan for Growth, paras 2.11 and 2.12, page 44.)

Previously developed land and national targets

The government intends to abolish nationally imposed targets, which specify the levels of development that should take place on previously developed land. The government sees these as:

Preventing local communities from exercising choice in respect of local land.
Contributing to inflation of land prices in certain areas.
Limiting the supply of new homes.

Removing these constraints will not affect the existing controls on developing on green belt land, Sites of Special Scientific Interest, Areas of Outstanding Natural Beauty or other environmental designations.

(See Budget Report, para 1.82 and The Plan for Growth, paras 2.20 and 2.21, page 45.)

Land auctions

As expected, the 2011 Budget confirms the government's intention to pilot some sort of land auction model on public sector land.

The Budget Report contains no details of the scheme but preceding reports in the property press indicate that it will involve local authorities inviting landowners to submit a binding price at which the landowner would be willing, for a fixed period of time, to sell their plot of land.

The local authority would have the right to buy that plot of land at the set price and grant planning permission, as appropriate. The local authority would then auction the land to interested developers and keep any increase in the sale price.

The scheme is intended to:

Allow local authorities to benefit, financially, from the increased land value generated when planning permission is granted.
Make more land available for development.
Produce greater certainty for developers and reduce the risks when applying for planning permission.
Discourage developers from retaining large, undeveloped land bank portfolios.
Encourage competition.

However, the auction model has also been criticised because:

It could increase planning delays by using up planning officers' time.
Local authorities may make inappropriate planning decisions on the basis of where most money could be made.
Local plans that identify particular areas for development may be undermined if the auctioned land is located elsewhere.

The government intends to pilot the scheme on publicly owned land within the next 12 months. At the same time the government will consider how the scheme could be expanded into the private sector and implemented more widely.

(See Budget Report, para 1.82 and The Plan for Growth, paras 2.18 and 2.19, page 45.)

Release of public sector land

The government has announced its intention for local authorities to expedite planning decisions for surplus military land and other publicly owned land suitable for building new homes. The government may also consider schemes where the land value is only paid when the developer begins to sell the new homes. The Budget Report contains no further details.

Taken together with the other proposed planning reforms (particularly the presumption for sustainable development), the government predicts that by 2014-15, disposals by the Ministry of Defence could:

Generate up to £350 million.
Potentially deliver 20,000 new homes.

(See Budget Report, para 1.83 and The Plan for Growth, paras 2.11 and 2.12, page 44.)

Streamlining the planning system

The government has proposed a number of measures to streamline the planning system by:

Ensuring that planning applications and related consents are processed promptly and introducing a 12 month guarantee for the processing of all planning applications (including appeals). This guarantee will be underwritten by a requirement for the Secretary of State for Communities and Local Government to report to Parliament on cases where this time limit has not been met.
Consulting in summer 2011, on expanding permitted development rights to include further types of minor commercial development. This will mean that planning permission will not be required from the local authority.
Consulting in autumn 2011, on a further package of measures to streamline the information required to support planning applications.

The government will publish its first annual update on simplifying and streamlining measures in planning and development control, in autumn 2011.

(See Budget Report, para 1.82 and The Plan for Growth, para 2.24, page 46.)

Fast-track planning process for major infrastructure applications

The government has announced:

That major infrastructure applications will be determined within 12 months from the start of the inquiry to the decision (see Practice note, Planning Act 2008: examination procedures for nationally significant infrastructure projects).
The publication of a policy framework for UK aviation on 31 March 2011 (see Aviation).
A new timetable for publishing the remaining national policy statements (see Practice note, Planning Act 2008: National Policy Statements: Timetable for the preparation and designation of NPSs).

(See Budget Report, para 1.82 and The Plan for Growth, para 2.29, page 47.)

Conversion of commercial premises to residential

The government has announced that it:

Wants to identify more opportunities to exempt development from the planning system and will consult on a proposal to allow changes of use, without the need to apply for planning permission, to class C3 (residential) of the Town and Country Planning (Use Classes) Order 1987 (SI 1987/764) (UCO 1987) from:
- class B1 (business);
- class B2 (general industrial); or
- class B8 (storage/distribution).
Will conduct a review of the UCO 1987 and associated permitted development rights.

For further information, see Practice note, Town and country planning: changes of use not requiring specific planning permission.

(See Budget Report, para 1.82 and The Plan for Growth, para 2.22, page 45.)

Prioritising growth and jobs when granting development consent

The Secretary of State for Communities and Local Government has made a written statement setting down a clear expectation that local authorities and other bodies involved in granting development consents should prioritise growth and jobs. This statement of government policy is capable of becoming a material consideration in local planning decisions.

(See Budget Report, para 1.82 and The Plan for Growth, para 2.9, page 43.)

Neighbourhood plans and neighbourhood development orders

The government has announced that it will enable businesses to bring forward neighbourhood plans and neighbourhood development orders (NDOs).

An NDO is a development order that deems planning permission to have been granted for specific development or specified classes of development within all or part of a neighbourhood area (see Practice note, Localism Bill: neighbourhood development orders).

The Localism Bill was introduced in the House of Commons on 13 December 2010. The Localism Bill sets out plans to decentralise government to a local level and also makes reforms to the planning and social housing regimes (see Practice note, Localism Bill).

The Localism Bill will introduce new rights for local communities to shape their local areas through:

Neighbourhood development plans.
NDOs.

(See The Plan for Growth, para 2.16, page 45.)

Duty on local authorities and public bodies to co-operate on planning issues

Clause 90 of the Localism Bill inserts a new section 33A into the Planning and Compulsory Purchase Act 2004 (PCPA 2004) that requires local planning authorities to cooperate with each other in relation to sustainable development and the use of land for strategic infrastructure in:

The preparation of development plan documents.
The preparation of other local development documents.
Other activities that support the planning of development.

This duty is a key element of the government’s proposals for strategic working, once Regional Strategies are abolished (see Legal update, Revocation of Regional Strategies announced in a letter to Chief Planning Officers).

The government aims to strengthen the proposed requirement for local authorities to demonstrate that they have planned for key sub-national infrastructure.

(See The Plan for Growth, para 2.35, page 47.)

National planning policy framework

The government wants more development in suitable and viable locations and will produce a national planning policy framework (NPPF) to deliver this (see Legal update, Introduction of a National Planning Policy Framework). The NPPF will set out the government's key economic, social and environmental objectives and the planning policies to deliver them.

(See The Plan for Growth, para 2.13, page 44.)

Enterprise Zones

Enterprise Zones were originally introduced under the Local Government, Planning and Land Act 1980, but the programme ended in 2006. The government has announced that up to 21 new Enterprise Zones will be established, where economic growth will be encouraged by a mix of financial incentives and a more relaxed planning regime.

For details of the announcements, see:

Chapter 1, paras 1.102-1.107, pages 31-34.
Chapter 2, para 2.85: Business Rate discount in Enterprise Zones, page 58.
The Plan for Growth, para 1.50, pages 31-32.

Location of the new Enterprise Zones

The government announced that new Enterprise Zones will be located in ten Local Enterprise Partnerships (LEPs). Each of those LEPs has to decide precisely which part of their area will be included in their zone. They are encouraged to choose areas where there is real opportunity for growth, not simply areas of local dereliction.

The ten LEPs are:

Birmingham and Solihull.
Leeds City Region.
Sheffield City Region.
Liverpool City Region.
Greater Manchester.
West of England.
Tees Valley.
North Eastern.
The Black Country.
Derby and Derbyshire with Nottingham and Nottinghamshire.

In addition, one Enterprise Zone has been allocated in London. Since the budget speech, the Mayor of London has announced that this zone will cover the London Borough of Newham's Royal Docks.

Over the summer, the government will take bids from a further ten LEPs to designate part of their area as an Enterprise Zone. They will also discuss, with the devolved administrations, how to extend the Enterprise Zone model across the UK.

It was possible to identify whether a property fell within an old Enterprise Zone by raising the relevant optional enquiry on the local search. See Practice note, Searches: Enquiries of a local authority: 13. Enterprise Zones.

Benefits available to business in an Enterprise Zone

Four types of benefit have been announced in the 2011 Budget, but others may become available following negotiation between the LEP and the government. It seems the intention is for each LEP to decide what package of measures would best encourage economic growth in its area.

The benefits applicable to all Enterprise Zones are:

A full (100%) discount on business rates for any business that moves into an Enterprise Zone during the course of this Parliament. The suggestion is that this may be worth up to £275,000 over a five year period.
The local authorities within the LEP area can retain all the business rates growth generated within the Enterprise Zone, for a period of at least 25 years. If there is more than one local authority, they will share that money. The funds should be reinvested locally, so as to support the economic priorities of the LEP. The government hopes that this will be used as a basis for long-term sustainability and cooperation across the LEP.
The planning regime will be simplified radically. There is no blueprint for how this will be done. The only reference is to the possible use of Local Development Orders. These expand the types of development that can proceed without formal planning consent. For more details, see Practice note, Local Development Orders.
Help from the government to ensure that superfast broadband is rolled out through the Enterprise Zone. This is to be achieved by a supportive planning environment and (if necessary) by public funding.

The other types of benefit that may be agreed in discussion between the LEP and the government include:

Enhanced capital allowances for plant and machinery investment in Enterprise Zones where there is a strong emphasis on manufacturing.
Use of Tax Increment Financing.
Support from UK Trade and Investment (UKTI) to promote inward investment and trade opportunities within the Enterprise Zone. The form of this support is not specified, and therefore may not be financial.

Business rates

Small business rate relief

The government confirmed in the June 2010 Budget that, for one year from 1 October 2010, there would be full relief for eligible small businesses occupying property with a rateable value of up to £6,000, and tapering relief for businesses with a rateable value of up to £12,000 (see Legal update, June 2010 Budget: property implications: Small business rate relief).

The government has confirmed that the small business rate relief holiday will be extended by one year from 1 October 2011.

(Budget Report, paras 1.86 and 2.86, pages 30 and 58 respectively.)

Business rate discount in Enterprise Zones

The government will offer up to 100% discount on business rates for five years to businesses located in Enterprise Zones For more information on Enterprise Zones, see Enterprise zones.

(Budget Report, para 2.85, page 58 and Overview, para 1.18: Business rate discounts in Enterprise Zones, page 4.)

Business allowances and reliefs

Business premises renovation allowance

The government has announced that it will extend the business premises renovation allowance (BPRA) for a further five years from 11 April 2012 (it was due to end on 10 April 2012).

BPRA is a tax allowance provided by HMRC as an incentive to renovate derelict or unused properties in disadvantaged areas and bring them back into use. It aims to stimulate investment by allowing a 100% first-year capital allowance on qualifying expenditure associated with the conversion, refurbishment or renovation of qualifying business properties that have been vacant for at least 12 months. Qualifying buildings should have been last used for a commercial purpose and must be retained for seven years after completion of the renovation works, to avoid clawback of any tax gains on the property.

A disadvantaged area is any area included in the Assisted Areas Order 2007 or in Northern Ireland. Areas such as North Cornwall and Isles of Scilly in England, and Swansea and Pembrokeshire in Wales, are included in the 2007 Order.

(See Budget Report, para 1.95: Investment, page 31 and Overview, para 3.21: Business premises renovation allowance, page 29.)

Capital allowances: short life assets

The government has announced that legislation will be introduced in the Finance Bill 2011 to extend, to eight years, the cut-off period up until which expenditure on plant or machinery purchased after April 2011 can be given short life asset (SLA) treatment.

If a business makes an SLA election in respect of plant and machinery, capital allowances are calculated individually on the asset until the cut-off point. So, if the asset is sold or scrapped before this point, the total allowances given over the period of ownership equal the actual net cost of the asset to the business. The current cut-off period is four years.

The increased period, during which time assets can benefit from an SLA election, will benefit businesses where the assets depreciate faster than the rate at which capital allowances are given.

The measure will have effect for expenditure incurred:

On or after 1 April 2011 for businesses that fall within the charge to corporation tax.
On or after 6 April 2011 for businesses that fall within the charge to income tax.

(See Budget Report, para 1.95: Investment, page 31 and Overview, para 1.10: Capital allowances: Short life assets, page 2 and TIIN, page A41.)

Financial reporting: lease accounting standards

The government has confirmed that the Finance Bill 2011 will include provisions to ensure that the tax treatment of leases will not be affected by proposals from the International Accounting Standards Board (IASB) to change the way leases are treated for accounting purposes. For more information, see Legal update, Taxation of leases: draft Finance Bill 2011 clauses.

(See Budget Report, para 2.110, page 60.)

Stamp duty land tax

SDLT rates

There are no changes to the main rates and thresholds for SDLT in the 2011 Budget.

For details of the rates and thresholds, see Practice note, SDLT and stamp duty rates (for land): General rates of SDLT.

First-time buyer relief

In the March 2010 Budget, the former Labour government announced the introduction of SDLT relief for first-time buyers of residential property where the consideration does not exceed £250,000. (See Legal update, March 2010 Budget: key business tax announcements: SDLT and residential property: nil rate threshold doubled for first-time buyers.)

In the June 2010 Budget, the government said that it would review first-time buyer relief taking into account its impact on affordability and value for money. (See June 2010 Budget: property implications: First-time buyer "relief".)

The government has stated in the 2011 Budget that it will announce the outcome of this review in the autumn.

(See Budget Report, para 2.156: SDLT: relief for first-time buyers, page 65.)

Reform of rules for bulk purchases of residential property

Legislation will be introduced in the Finance Bill 2011 to provide a relief for buyers of residential property who acquire interests in more than one dwelling from the same seller.

Under the current rules:

A buyer who buys multiple properties from the same seller will pay SDLT on the total consideration given for the land (see Practice note, SDLT and contracts for the transfer of land: Linked transactions). This can lead to the buyer paying a higher rate of tax than individual purchasers would have paid for the properties separately.
Where there is a single transaction for the sale or grant of a lease of six or more separate dwellings, those properties will be treated for SDLT purposes as non-residential property (section 116(7), Finance Act 2003).

The new relief will have effect for transactions where the effective date is on, or after, the date on which the Finance Bill 2011 receives Royal Assent.

If the buyer chooses to claim the relief:

Subject to a minimum rate of 1%, the rate of SDLT will be determined by the mean consideration. In other words, by the aggregate consideration divided by the number of dwellings.
The dwellings will be treated as residential property no matter how many dwellings are involved.

(See Overview, para 1.34: Stamp duty land tax (SDLT) reform of rules for bulk purchases, page 7 and TIIN, page A111-113.)

The aim of this relief is to reduce the barrier to investment in residential property, and promote the supply of private rented housing. For information on the background to this measure, see Legal updates:

Withdrawal of disadvantaged area relief

The government has announced that disadvantaged areas relief from SDLT and stamp duty will be abolished after 2012.

The final date for abolishing the reliefs will be set out after consultation.

For more information on disadvantaged area relief, see Practice note, SDLT relief for land transactions in disadvantaged areas.

(See Budget Report, para 2.173, page 67.)

Anti-avoidance

In the 2011 Budget, the government announced three legislative changes designed to ensure that certain SDLT avoidance schemes are ineffective.

These anti-avoidance measures are set out in detail in HMRC's note, Preventing avoidance: Stamp Duty Land Tax: Draft legislation and Explanatory Note, and they will be given effect by amending the FA 2003. The changes will come into force on 24 March 2011, although there are some transitional measures for arrangements entered into before 24 March 2011.

The anti-avoidance measures relate to the:

Relationship between sub-sale relief and alternative property finance reliefs.
Definition of "financial institution" for alternative property finance reliefs.
Determination of consideration on exchanges of land.

(See Budget Report, para 2.177: SDLT, page 68 and Overview, para 1.39: SDLT anti-avoidance, page 8 and TIIN, pages A133-135).

Relationship between sub-sale relief and alternative property finance reliefs

The term "alternative property finance" refers to what are commonly known as "Islamic mortgages". Because of the way such alternative property finance arrangements work, SDLT reliefs were added to the FA 2003 to avoid additional tax charges that would not apply to a standard mortgage or charging arrangement over property. For more information, see Practice note, SDLT reliefs for the public sector and other bodies: Alternative property finance.

The SDLT regime also provides for a relief from SDLT on a sub-sale or similar arrangement, such as an assignment of rights under a sale contract (section 45, FA 2003, as amended). For more information, see Practice note, SDLT and contracts for the transfer of land: Transfers of rights: sub-sales, assignments and other transactions.

The interaction of the two reliefs created scope for avoiding a charge to SDLT, so the legislation was changed to prevent the use of section 45 of the FA 2003 where an SDLT relief was available under section 73(3) of the FA 2003. However, other types of alternative property finance relief were not covered by this exclusion.

The Finance Bill 2011 will amend section 45(3) of the FA 2003, extending the exception from the relief for sub-sales and transfers of rights to cover all the alternative property finance reliefs set out in sections 71A to 73 of the FA 2003.

This change applies to transactions with an effective date on, or after, 24 March 2011. The draft legislation contained in Preventing avoidance: Stamp Duty Land Tax: Draft legislation and Explanatory Note includes provisions dealing with contracts entered into before that date. Broadly, transactions completed before 24 March 2011, or which are effected under a contract entered into before 24 March 2011, will not be affected by the change. Interested parties should check the details of the proposed legislation to see if these transitional measures are important to their transaction.

Definition of "financial institution" for alternative property finance reliefs

Sections 71A(8), 72(7), 72A(8) and 73(5)(a) of the FA 2003 specify the meaning of "financial institution" for the purposes of the alternative finance reliefs from SDLT.

As defined on 23 March 2011, a "financial institution" includes not only banks, building societies and insurance companies, but also anyone holding a consumer credit licence. For more information on the consumer credit regime, see Practice note, An overview of the UK consumer credit regime.

From 24 March 2011, it will no longer be possible to qualify as a "financial institution" under those sections of the FA 2003, merely by holding a consumer credit licence. The draft legislation contained in Preventing avoidance: Stamp Duty Land Tax: Draft legislation and Explanatory Note provides that this change will not catch arrangements entered into before that date. However, practitioners dealing with an alternative finance arrangement involving parties that will be affected by the change to the definition of "financial institution" should review the precise wording of the amendments.

Determination of consideration on exchanges of land

The SDLT regime applies a market value charge to SDLT on exchanges of land, where at least one "major interest" is exchanged (section 47 and paragraph 5, Schedule 4, FA 2003). For more information, see Practice note, SDLT and contracts for the transfer of land: Exchanges.

The chargeable consideration for exchanges involving a major interest in land will be changed to the greater of:

The market value of the interest acquired.
What the chargeable consideration would be under the normal SDLT rules for consideration.

Real Estate Investment Trusts (REITs)

Simplification of the REITs regime

The government will make UK Real Estate Investment Trusts (REITs) easier to set up and more accessible to investors (see Budget Report, para 1.123, page 34). It plans to include provisions in the Finance Bill 2012 to support good business practices and remove barriers to entry, and investment in, the REITs regime (see Budget Report, para 2.157: Real Estate Investment Trusts (REITs), page 65).

The property industry has campaigned for some time for changes to the REITs regime and will therefore welcome the proposed measures. For information, see PLC Property trends and developments tracker: Residential REITs.

The government intends to adopt a range of measures to simplify REITs and hopes that this will, in turn, support investment in the housing market and help the construction industry (see The Plan for Growth, paras 1.67 and 2.294, pages 29 and 116 respectively). It plans to consult on the following proposals shortly after the 2011 Budget:

Introducing a diverse ownership rule for institutional investors to enable them to meet the rule that prevents close companies from becoming a REIT (see Practice note, UK REITs: questions and answers: Company conditions). This will enable institutional investors, such as pension funds and insurers, to set up UK REITs.
Allowing cash to be a "good" asset for the purpose of the REIT balance of business asset test (see Practice note, UK REITs: questions and answers: Business conditions). This is designed to allow UK REITs to make investment decisions on a commercial basis.
Extending the time limit for complying with the distribution requirement that applies in particular circumstances involving stock dividends. This will reduce the administrative burden on those REITs that pay out dividends on a six monthly basis.
Redefining "financing costs" for the REIT interest cover test to give certainty regarding this requirement. REITs are subject to a tax charge if the income profits of the REIT's tax-exempt business do not cover its related financing costs at least 1.25 times (see Practice note, UK REITs: questions and answers: Further restrictions).
Removing the REITs conversion charge, which is currently 2% of the gross market value of the company's property rental business assets (see Practice note, UK REITs: questions and answers: Entry charge). This high entry cost has been identified as one of the disincentives for companies thinking about forming a REIT.
Introducing a fixed grace period for new REITs to meet the requirement that they must not be a close company. This will enable start up UK REITs to build sufficient reputation to attract shareholders. It builds on measures included in the Finance Act 2009 to relax the REIT conditions (Practice note, UK REITs: questions and answers: Company conditions).
Relaxing the requirement for a UK REIT to be listed on a recognised stock exchange (Practice note, UK REITs: questions and answers: Company conditions). This will encourage entry into the REITs regime, particularly for start-up property investment companies.
Making technical changes to the REITs legislation.

(See Overview, para 3.22: Real estate investment trusts (REITs), page 23.)

The reforms to the SDLT rules for bulk purchases of residential property announced in the 2011 Budget may encourage REITs to consider investing in residential property (see Stamp duty land tax).

Deregulation

Easing the burden of regulation

The government plans to reduce burdensome and costly UK and EU regulations. It will launch a public review over the next year, which will cover different areas including:

Health and safety.
Construction.
Equality Act 2011.
Local authority contracts.
Abolition of money laundering offences.

Health and safety

The government will implement the proposals from Lord Young’s health and safety review. On 21 March 2011, the government announced that it will:

Introduce new risk assessment tools and require health and safety consultants to be registered.
Introduce combined food safety and health and safety inspections in local authorities to reduce time spent with regulators.
Take action to constrain "no win, no fee" legal practices.

For background information on the review, see Legal update, Reform of health and safety law: more government announcements.

Construction

The government plans to remove obstacles to growth and create a business environment in which companies in the construction sector have the confidence to invest in people, improve supply chain integration and develop innovative processes. In addition, it will tackle the problems of burdensome regulation, and reform the planning system to increase the supply of viable land allocated for development (see Planning).

Scrap proposals for costly specific regulations: Equality Act 2010

The government plans to scrap existing proposals for specific regulations under the Equality Act 2010, that would have cost businesses over £350 million a year to implement. For example, it will:

Not bring forward rules in the Equality Act 2010 preventing discrimination on more than one ground (dual discrimination).
Consult on removing the requirement in the Equality Act 2010 for businesses to take reasonable steps to prevent harassment of their staff by third parties over whom they have no control.

For more information see Practice note, Equality Act 2010: employment implications.

Local authority contracts

The government will reduce regulation and increase transparency to make it easier for small businesses and voluntary organisations to compete for local authority contracts.

Abolition of money laundering offences

The government will shortly consult on detailed proposals for changes to the money laundering legislation to ensure that there is an effective and proportionate anti-money laundering regime, while minimising the burden imposed on businesses. The government wants to abolish around 24 regulatory offences under the legislation, and to exempt businesses with very low turnovers, thereby reducing compliance burdens. The business sector has expressed particular concerns about unnecessary regulation relating to money laundering, the Bribery Act 2010 and employment law.

For background information on money laundering, see Practice note, Anti-money laundering measures for lawyers: the 2007 rules.

(See Budget Report, para 1.81: Deregulation, page 28 and The Plan for Growth, paras 2.39-2.61: Regulation, pages 51-55; para 2.127: Competition, page 73; paras 2.246 and 2.253: Professional and Business Services, pages 105-106; para 2.287: Construction, page 115).

Residential housing

Help for first-time buyers

The government will provide £250 million to support first-time buyers to purchase new-build properties. The FirstBuy programme will assist over 10,000 households with equity loans of 20% of the cost of relevant properties. The loans will be jointly funded by the government and house-builders. The purchaser will need to provide a 5% deposit. Loans will be interest-free for the first five years and repaid on resale of the property.

(HM Treasury Press notice Budget 2011; Budget Report, para 1.121: Housing, page 34 and The Plan for Growth, para 1.67: What the government will do now, page 39; para 2.290: Construction, page 116; DCLG: Eric Pickles: Radical changes in housing and planning will drive local growth (23 March 2011); DCLG: Grant Shapps: Budget is a boost for first-time buyers.)

Support for mortgage interest

The government has announced that it will extend, for a further year, the Support for Mortgage Interest (SMI) scheme.

The SMI scheme is available as an additional benefit to homeowners already receiving Income Support, income-based Jobseeker's Allowance or income-related Employment and Support Allowance.

SMI is currently available after 13 weeks at 100% of eligible mortgage interest on mortgages of up to £200,000. This benefit was due to end in January 2012 but will now continue until January 2013.

(See Budget Report, para 1.121: Housing, page 34.)

Council tax

Although some budget reports have announced that council tax is to be frozen or reduced this year in every English council, this measure was actually announced in the June 2010 Budget (see Legal update, June 2010 Budget: property implications: Council Tax).

The government has announced (on 23 March 2011) the freezing of council tax. See DCLG press release, Eric Pickles: 100 per cent council tax freeze protection delivered across the country, 23 March 2011.

Housing benefit

The government will not take forward the planned 10% reduction in Housing Benefit for long-term claimants of Jobseeker's Allowance. This was announced by the Department of Work and Pensions as part of the Welfare Reform Bill 2011.

(Budget Report, para 2.61, Housing Benefit: amendment to ten per cent reduction for Jobseeker's Allowance (JSA) claimants, page 55.)

Local Housing Allowance (LHA) rates will be set at the 30th percentile of local market rents and will be capped at:

£250 per week for a one bedroom property.
£290 per week for a two bedroom property.
£340 per week for a three bedroom property.
£400 per week for a four bedroom (or more) property.

These measures will come into effect from April 2011 for new claimants and January 2012 for existing claimants.

The rates were announced in the June 2010 Budget and the Department of Work and Pensions first announced when the rates would come into effect in November 2010.

(See Budget Report, para 2.62, Housing Benefit: transitional arrangements for Local Housing Allowance (LHA) claimants, page 55.)

WaterSure and water affordability

The government is committed to supporting households facing difficulties because of the cost of water, in particular those households in areas with high water bills, such as the South West.

The government will consult on proposals to address water affordability, which will include reforms to the existing WaterSure scheme, the approach to Company Social Tariffs and options for additional government spending to provide further support.

(See Budget Report, paras 1.156 and 2.154, Water, pages 39 and 65.)

Infrastructure and construction projects

Reporting on infrastructure and construction projects

To encourage investment and exports as a route to a more balanced economy, the government plans:

In autumn 2011, to publish the UK's long-term forward view of projects and programmes as part of the National Infrastructure Plan.
From autumn 2011, to publish quarterly a rolling two-year forward programme of infrastructure and construction projects where public funding has been agreed.

For more information on the National Infrastructure Plan, see Legal update, Government publishes National Infrastructure Plan 2010: construction, environment and property implications

(See Budget Report, para 1.98: Investment, page 31.)

Investment in rail

The government announced £200 million of new funding for rail projects. This is in addition to the commitment to invest over £30 billion in transport projects.

Specifically, the Chancellor confirmed that the government will proceed with:

The £85 million Ordsall Chord scheme, linking Manchester's Victoria and Piccadilly stations, which should significantly reduce journey times between Liverpool and Leeds.
The Swindon to Kemble redoubling scheme, which will complement electrification of the Great Western Main Line to Wales.

Aviation

Alongside the Budget 2011, the government published a consultation paper, HM Treasury: Reform of air passenger duty (23 March 2011). Although not directly relevant to the Property industry, paragraph 3.10 states that it is important to recognise the impact of air transportation on communities in close proximity to airports. In developing its forthcoming aviation policy framework, the government will aim to strike "the right balance between its support for sustainable growth in aviation and measures that help to limit the impact of aviation on the local environment".

(HM Treasury: Reform of air passenger duty, para 3.10.)

Income tax

Merger of income tax and National Insurance Contributions

The government intends to simplify the tax system to ease the burden of tax compliance for businesses and individuals. As part of this exercise, the government wishes to integrate the operation of income tax and National Insurance Contributions. To this end, the government will consult in 2011 on the options, stages and timing of reform.

The government confirms that with any reforms, it will:

Maintain the contributory principle.
Not extend National Insurance Contributions to "other forms of income such as pensions, savings and dividends". Although not expressly mentioned, it is not thought that National Insurance Contributions will extend to income from property.

For more information on Income Tax and National Insurance Contributions, see:

Practice note, Direct taxes: Income tax.
PLC Share Schemes & Incentives Practice note, National insurance contributions (NICs) on employee securities and options: Guide to statutory provisions.

(See Budget Report, para 1.76: Tax simplification, page 28.)

Furnished holiday lettings

From April 2011, new tax rules for Furnished holiday lettings (FHL) will take effect. The new rules will mean that loss relief may only be offset against income from the same FHL business. Letting and availability thresholds will be increased from April 2012 (Finance Bill 2011).

For more information, see Legal update, Furnished holiday lettings rules: consultation responses and draft legislation

(See Budget Report, para 2.42, Furnished holiday lettings (FHL), page 53.)

2011 Budget: property implications | Practical Law