Chancellor George Osborne certainly believes ‘the sun has got his (hard) hat on’, but was there much in the Budget to brighten the outlook for the construction sector?
Help to buy ISA
This scheme, offering a government incentive of £3,000 to each first time buyer was, without a doubt, the headline grabbing measure of the budget. Whilst this may not have a long-term impact on any fundamental problems in the UK housing market, it has been generally well received by house-builders.
- New accounts will be available later this year for at least four years and, once open, can continue indefinitely.
- Accounts are limited to one per person, rather than one per home, so a couple can potentially receive up to £6,000 toward their deposit.
- Each person may deposit a maximum of £1,000 when opening an account in addition to monthly savings of up to £200 each.
- When funds from the ISA are used toward the deposit for that person’s first home, the government will add 25% to the amount so used, up to £3,000 per person.
- This bonus will be available on home purchases of up to £450,000 in London and £250,000 elsewhere.
Given that it will take five years to earn the full £3,000 bonus, those looking for their first step on the property ladder in London will note that the price of an average first home there would likely increase by that amount in under three months! Outside the South-East, however, this could make a real difference, as the scheme is pleasingly free from the restrictions we have seen with previous housing market stimulants. For example, it can be used for the purchase of any house, old or new, from any vendor, in any location, and using any mortgage product or provider. Lenders will also value the savings history of new applicants who have used the scheme.
The government confirmed the introduction of the first 20 ‘housing zones’ outside London, encouraging the construction of up to 45,000 homes on brownfield sites.
This doubled the number of zones previously planned but there was no increase in the £200 million loan funding available from government for these projects.
New digital apprenticeship vouchers should give employers greater control over apprenticeship funding. Employers will be able to use the vouchers to purchase training directly from providers using the voucher, paying only the balance of training costs which are not fully funded by government. The paperless system, administered by the Skills Funding Agency, will provide more choice over training programs for employers and the ‘up-front’ nature of the funding will be particularly welcomed by SMEs.
CIS Scheme changes
With little else of note for the sector we take the opportunity of reminding you of a package of simplifications of the scheme announced in the 2014 Budget which have effect from 1 April 2015. These include:
- the removal of the obligation to file a return in cases where the contractor has not paid any subcontractors in a tax month;
- the reduction of the threshold for the turnover test to £100,000 in multiple directorships;
- a reduction in the obligations considered in the initial and annual compliance tests;
- easier access to gross payment status;
- immediate gross status for joint ventures where one member already holds gross status.
We welcome the last of these measures in particular. With the effective removal of the small profits marginal rate of corporation tax from the same date, a major disincentive for businesses in the sector to spin out parts of their business as separate entities, has been removed. Often this will be done to form a joint venture with other businesses, but increasingly also to allow employee participation through the use of tax-advantaged schemes such as EMI or Employee Shareholder Status. Previously the delay in obtaining gross payment status for the new entity was a frustrating practical problem in these circumstances.
For further information, please contact us.
Business tax team