Having allocated £7.2bn to support the construction of new homes, including spending by housing associations, it was a clear message in an Autumn Statement that overall lacked detail. Housing is the Government’s priority moving forwards, receiving more funds than any other key national infrastructure, but what else did Chancellor Philip Hammond announce to support the industry?
Infrastructure investment across the board
£2.3 billion has been budgeted for a new Housing Infrastructure Fund, which will be used for projects such as roads and water connections that will support the construction of up to 100,000 new homes in the areas where they are needed most. Funding is provided by the Northern Powerhouse Investment Fund (NPIF) and will be fulfilled by 2020-21. The Government will also examine options to ensure that other transport funding better supports housing growth.
On top of that, £1.4 billion will be used to provide 40,000 new affordable homes, including some for shared ownership and some for affordable rent. To ensure the housing needs of people, in different circumstances and at different stages of their lives are met, the Government will relax restrictions on grant funding to allow providers to deliver a mix of homes for affordable rent and low-cost ownership.
Another £1.7 billion will be used to speed up the construction of new homes on public sector land. This pilot was announced in October, and will cover building in England through partnerships with private sector developers.
Alongside all these financial commitments, the Government has also announced that they will fund a large-scale regional pilot of the Right to Buy for housing association tenants. Over 3,000 tenants will be able to buy their own home with Right to Buy discounts under the pilot.
Although we are awaiting the full details in the Housing White Paper, to be published ‘shortly’, it will work towards setting out a comprehensive package of reform to increase housing supply and halt the decline in housing affordability using the deliverables above.
Separate from the infrastructure financing, the continued support for R&D funding is enormously welcomed. Although the additional funding implementations will likely be focused on relationship building between scientific research institutes and the UK’s bigger businesses, and the development of technologies such as robotics, artificial intelligence and industrial biotechnology, real estate and construction companies are still missing out on billions of pounds a year in R&D tax credits by failing to claim for their full entitlements. This is due to many construction firms being unaware that their existing activities are well within the scope of the tax relief available. If you’d like to know more about how you could claim R&D tax credits, take a look at our blog here
Disappointments in the ignored and changed
The stamp duty tax on institutional Build-to-Rent housing continues to disappoint across the industry, with fears that this is the wrong message to send out – especially when the interested parties are willing to invest billions on new homes that are needed. It had been hoped this would be revoked, but there was no such luck.
However, there was confirmation for the ‘Base Erosion and Profit Shifting (BEPS) action point 4’ proposals which will restrict interest deductibility for companies, broadly to 30% of EBITDA. This will take effect from April 2017, and will likely have a substantial impact on the sector, given the extent real estate projects are usually supported by debt.
On this point and more, Melanie Leech, Chief Executive of the British Property Federation commented that they “remain concerned that the proposals to restrict tax relief on interest costs and reform the loss relief rules will inadvertently hinder investment in real estate and infrastructure, even where no tax avoidance is taking place. We are disappointed that the Government is going ahead with implementation in April 2017."
The future changes are also a concern with an expected consultation at Budget 2017 to decide whether non-resident owners of UK investment property should be brought within the charge to UK corporation tax and hence subject to the same rules as UK companies, including the now confirmed restrictions on the deductibility of interest.
Want to know more?
This summary has hopefully provided insight into how the Autumn Statement announcements will affect you and your business, and we are happy to help provide guidance on the changes. For a more general overview please click here
Businesses come to Moore Stephens because of our specialist knowledge of real estate and construction and the wide-ranging advice and assistance we can give them. For more information or to discuss how we could help you with the transition, please contact us