The changes introduced by the Pre-Budget Report (PBR), whilst not huge, will assist some sectors and will affect most commercial transactions.
Change in prevailing rate of VAT
The major change is the reduction for a period of one year, from 1 December 2008, in the rate of VAT to 15 per cent. This will give a minor cash flow benefit on all vatable transactions but will be of little consequence to the majority of buyers, who will be able to reclaim VAT.
Empty Property Rates Relief
The government has suspended the payment of business rates on empty properties with a rateable value (RV) of less than £15,000. An RV of £15,000 equates to an approximate capital value of £250,000 so, although the Treasury claims this measure will remove liability for 70 per cent of empty properties, it is clear that only small properties will benefit. There is no weighting for properties in London. The suspension is for a period of one year from 1 April 2009.
Land remediation relief
Tax relief is to be introduced for expenditure incurred on or after 1 April 2009 on the remediation of land which has been derelict since April 1998. There is existing tax relief available for some remediation works, but it is narrow in scope and, as it is delivered as relief from Corporation Tax, various entities are prevented from claiming the relief; viz sole traders, individuals operating in partnership and non UK resident property owners. The current relief is not available for naturally occurring contamination, although arsenic, radon and Japanese knotweed are specifically included. The new relief is not available to a wider class of claimants, nor does it widen the scope of the existing relief, indeed it provides that some tax relief will only be available for environmentally sustainable methods of decontamination. For example, the treatment of sites contaminated by Japanese knotweed by the removal of soil to landfill sites will not qualify for tax relief from 1 April 2009.
Tax relief is given by allowing Corporation Tax payers to deduct 150% of the qualifying costs from Corporation Tax due or by giving a tax credit for surrendered losses. The exact scope of the new relief for remediating derelict land is to be determined by secondary legislation but will include some removal, below ground demolition and some preparatory costs.
UK Real Estate Investment Trusts (Reits)
Legislation is to be introduced to prevent Reits from circumventing the Reit conditions by the artificial creation of new group structures.
The government is providing an additional £535 million to promote its environmental objectives, and some of this money should support the construction industry through these lean times. £100 million is to be made available to households to install insulation and improved heating systems. £60 million is to be used to provide 16,000 units of social housing with energy efficiency and heating measures under the Decent Homes Programme. £25 million is to be spent on flood defences and the British Waterways Infrastructure.
For further information, please contact:
Amanda Hado-Bodfield, Partner, Fladgate LLP (firstname.lastname@example.org)