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Autumn 2017 Budget Commentary

Our experts across the UK provide their views on property related items arising from the Chancellor's Autumn 2017 Budget presentation to Parliament.


Dr Nigel Almond, Partner, Head of Data Analytics, EMEA Research, assesses the effects for the investment market: "The UK government announced proposals to remove the capital gains tax (CGT) exemption for foreign investors, with the exception of pension funds, in a move that could take effect from April 2019 and brings the UK into line with most other countries.

"Overseas investment plays an important role in UK commercial real estate markets and has represented over half of the investment into the UK over the past decade. Much of that capital has been focused on Central London where overseas buyers have accounted for over two thirds of transactions by value across central London. Yet the opposite is true across the rest of the UK, where domestic buyers have accounted for close to two thirds of activity. There are of course many UK funds domiciled overseas, which may have wider impacts. 

"The introduction of these measures comes at a time when seeking new capital into the UK is critical for the economy and wider real estate and infrastructure markets. It is hoped that the consultation on the proposals running until February next years will allow the wider industry to lobby against the proposals and perhaps remove some of the sting. However, if enacted, this could damage the level of capital flowing into the UK. On the flip side a move to taxing the success of a transaction might be welcomed if there was a commensurate cut in stamp duty."


Mike Flecknoe, Partner, Rating, said: “The early conversion to CPI from RPI to adjust the multiplier was widely expected. However, this simply reduces the increase of rates liability from 3.9% to 3.0% in April 2018. In itself it is difficult to see how this will materially impact future business investment decisions.

“Reversing the effect of the Supreme Court decision that created the ‘staircase tax’, especially since any adverse effect will be backdated, will be welcomed by those ratepayers impacted. I am slightly concerned the Chancellor implied that ratepayers would have to request that the Valuation Office take action due to the 31 March 2018 deadline for the Valuation Office to amend 2010 Rateable Values. I hope the Valuation Office will treat this exercise as a priority.

“Finally the change to three-yearly revaluations after 2022 is positive since in the longer term future rates liability should more closely align to economic activity and performance.”


Jeanette Edmiston, Partner, Head of Capital Allowances & Property Taxation, provided her commentary:

Enhanced Capital Allowances (ECA)

  • This measure will affect businesses purchasing designated plant and machinery which uses energy efficiently.
  • The schemes allow 100% of the cost of an investment in qualifying plant and machinery to be written off against the taxable income of the period in which the investment is made, improving cash flow for businesses.  The aim is to reduce the consumption of energy by business, by encouraging investment in more efficient equipment. This can help reduce overall energy costs and carbon emissions, aiding the UK’s carbon reduction obligations.

The actual measures are:

  • Enhanced Capital Allowances (ECAs) on energy-saving technologies, which provide a 100% first year allowance and are available to all tax payers will have the list of designated energy-saving technologies qualifying for ECAs updated in December via the Finance Bill.
  • The list will be updated to introduce evaporative air coolers, saturated steam to electricity conversions and white LED lighting modules for backlit illuminated signs.
  • Two categories will be removed: localised rapid steam generators and biomass fired warm air heaters. 
  • The qualifying criteria for 9 current technologies will be modified.

Annual Investment Allowance (AIA)

  • AIA is available on virtually all plant or machinery expenditure. It may be claimed on long-life assets, integral features and other special rate expenditure, as well as on general plant and machinery, and the taxpayer is free to allocate his AIA against any type of P&M expenditure in any way he chooses. To get the maximum benefit, taxpayers will commonly allocate the AIA against the expenditure that would otherwise receive the lowest rate of capital allowance.
  • The 100% AIA remains at £200,000.

First Year Credits

  • The government will extend the First Year Tax Credit scheme until the end of this Parliament, thereby making sure that loss-making companies (which does not include individual taxpayers, non-residents, partnerships etc.) are encouraged to invest in energy-efficient technology. 
  • The credit rate, which is currently 19%, will be set at two-thirds the rate of corporation tax from 1 April 2018.  Assuming this will be rounded up as before the new rate will be 13%. 
  • This will fall again in-line with the scheduled fall of CT rates to 17% in 2020.
  • It is interesting to note that the impact statement for this change issued by the Treasury shows negligible effect, underlining how small the benefit to companies from this credit actually is.

Gas Refuelling Equipment and Low Emission Goods Vehicles 

  • This measure will affect businesses incurring expenditure from April 2018 on the acquisition of zero-emission goods vehicles or gas refuelling equipment.
  • The measure extends the 100% First Year Allowance (FYA) for businesses purchasing zero emission goods vehicles or gas refuelling equipment for a further 3 years from April 2018.
  • The measure is designed to support transition in the UK to cleaner zero and ultra-low emission vehicles, helping to improve air quality and protect the environment.

Research & Development

  • The UK has one of the most competitive tax regimes for business, with the lowest corporate tax rate in the G20. The Budget reaffirms the government’s commitment to low, stable taxes, and it continues to take steps to support businesses to invest.  
  • This change will affect companies that carry out Research and Development (R&D) and claim Research and Development Expenditure Credit (RDEC). 
  • This measure increases the tax relief for large companies (and small and medium sized enterprises in some cases) that carry out qualifying R&D and claim the RDEC.
  • The RDEC (also known as the ‘Above the Line’ credit) is a standalone credit that is brought into account as a receipt in calculating profits. The current general rate is set as 11% of qualifying R&D expenditure. The RDEC will rise from 11% to 12%.
  • Removal of capital gains indexation allowance from 1 January 2018
  • This measure will affect any company that disposes of a capital asset which gives rise to a chargeable gain, and any company that holds shares in a share pool.
  • This measure means that when a company makes a capital gain on or after 1 January 2018, the indexation allowance that is applied to determine the amount of the chargeable gain will be calculated up to December 2017.
  • Without this measure, indexation allowance would be calculated up to the month in which the disposal of the asset occurs.
  • The measure aligns the treatment of capital gains by companies with that for individuals and non-incorporated businesses for whom indexation allowance was abolished in 2008. HMRC suggest this will simplify tax computations and remove a source of current errors.

Non-Resident Companies

  • From April 2020, income that non-resident companies receive from UK property will be chargeable to corporation tax rather than income tax. 
  • Also from that date, gains that arise to non-resident companies on the disposal of UK property will be charged to corporation tax rather than Capital Gains Tax (CGT).
  • Re-basing will apply so that any gain before this date is not taxed.


Ian Anderson, Partner, Planning & Development Consultancy, commented: “The Government has an enormous mountain to climb to achieve 300,000 homes per year by the 2020s and tackle decades of undersupply, yet today’s Budget was certainly no ‘game changer’ moment for the development market.

“The focus must be on delivery. Opening up the housebuilding market to new entrants will increase competition, and new finance for SME housebuilders could significantly increase output. New borrowing powers for local authorities to build homes could be the catalyst for a new age of council housing. However modular housing represents a big opportunity to deliver housing quickly and at scale but the government missed an opportunity to prioritise this.

“The Government is right to further streamline the planning system, but planning is not the whole story - the priority now must be to get existing permissions delivered. Whilst a review of the gap between the grant of planning permissions and delivery will now be undertaken, the Government has already mooted that it is likely to shorten planning permissions from three years to two years to force delivery of sites more quickly. We also believe they will encourage the greater use of Completion Notices, which already give councils the right to determine when a development must be completed. This could be a straightforward way to speed up the delivery of new homes and end land banking, using powers that local authorities already have.

“30% of the country still does not have a Local Plan, and the Government must be willing to step in and intervene directly in local authorities who drag their heels on getting a Local Plan in place. However local authority planning departments are also hopelessly under-resourced and the Government said nothing today about ensuring there are enough planners to deliver permissions more quickly.”  

“Although a stalwart of Middle England, it's time to have a sensible discussion on the Green Belt. There are many sites within the Green Belt which could be improved through development, such as industrial or underused commercial sites which could be converted to residential. The Government has set out plans to intensify areas around train stations and town centres, but this alone is not enough.” 

Mark Jackson, Partner, Development & Planning in Birmingham comments:

“It’s refreshing to hear acknowledgement that the planning system is not the sole reason for the housing crisis and that often planning permission is granted but not implemented. There will be a wide range of reasons why permissions are not being implemented. A taskforce looking at the reason behind delays in implementation is to present an Interim report in Spring 2018. The conclusions and recommendations of this report will be of significant interest to the real estate industry.

“The role of Homes England will be more important than ever in delivering homes and infrastructure to meet the 300,000 new homes target by 2020.  It is unfortunate that the provision of employment land did not get a specific mention given the importance of balancing new homes with employment.”


Simon Lloyd, Partner, Logistics & Industrial in Birmingham comments:

“From a property development perspective, the Budget’s focus was on the provision of housing and its affordability including measures to assist in creating new development sites and SDLT changes. Whilst this focus is entirely understandable and should be applauded, there was no mention of any attention being given to how employment land is to be brought forward to create the working space that the population needs, or to create the logistics facilities needed to enable purchases to be delivered to the residents, particularly those products acquired via the internet.

“The regional imbalance is being addressed via the Midlands Engine and its equivalents in other regions together with the recently elected Metro Mayors, and indeed another devolution deal has been agreed for the Midlands which is to be welcomed. Also further investment in infrastructure is to be applauded as this will generate growth, and with a particular focus the HS2 project. However, if the right amount of land in the right locations is not available, the impact of the investment in infrastructure will not be maximised. There is a continuing discussion around the redevelopment of brownfield sites, but in reality this has been going on for many years, whilst these sites are competing with residential uses and are already in short supply.

“At a time when growth forecasts for the UK are being downgraded, and with the current uncertainty around Brexit, it is even more important that the right land is made available for employment uses to encourage and enable them to grow. Furthermore, once the new residential areas have been developed, the population will need to be serviced by businesses operating from nearby sites, and the new population will also need access to local jobs. As land in the UK is in short supply, and there is a general reluctance to see the erosion of the Greenbelt, this is clearly a sensitive and difficult issue, but it needs to be addressed.”  


Lee Layton, Associate, Residential Research said, "Housing formed a significant part of Budget 2017, with the chancellor’s acknowledgement that successive governments are at fault for our current predicament being a good start. While the stated aim to achieve 300,000 net additions per annum would on the face of it, represent a positive continuation of current trajectory, is it realistic to think that we will increase construction levels by 8% year-on-year for the eight years to 2025 when we layer over potential labour shortages and a slowing market?

"Welcome news for first time buyers came in the form of the immediate removal of stamp-duty on homes purchased for under £300,000. Homes purchased for between £300,000 and £500,000 will not pay stamp duty on the first £300,000 and the normal rate of stamp duty on the price above that. There is no relief for those buying properties over £500,000. While welcomed by most (not just first time buyers), this will in real terms do little to limit the significant financial barriers to home ownership for young people.

"There was a distinctly urban focus to a bulk of the speech with an announcement that changes to the planning system will encourage better use of land in cities and towns. However, this was quickly followed by the statement that there will be a 'strong protection of the greenbelt', indicating that the governments belief that cities can flourish and grow through infill alone is unchanged.

"The chancellor also empowered local officials with the power to apply a 100% council tax premium to empty homes. The results of this policies implementation will be greatly anticipated as it has never quite become clear if this was a true problem, or just a hot political subject.

"A more off-the-radar announcement may well have the potential to positively impact the housing market to a greater degree than all the above (in the long run). This is the news that EIS (Enterprise Investment Scheme) limits are to be doubled. This has the potential to significantly increase the flow of investment into PropTech. While far harder to quantify and with a far longer payback period, this boost has the real potential to accelerate the progress being made by a growing number of start-up companies working to improve efficiency and solve problems in the wide-world of property."

Eleanor Deeley, Partner in the Residential team in Birmingham comments:

A Special Relationship with the Housing Market?

The chancellor talked about the deep and special relationship being forged with Europe, but does not seem to want to forge the same deep and special partnership with the volume housebuilders, the emphasis is very clearly on the public sector delivery of a step change in housing delivery.

The next generation was clearly on the mind of the Chancellor, a fairer Britain where all should share in the prosperity of the county, and while his budget focused on the first time buyers I doubt that his route to increasing the volume of housing by removing stamp duty for first time buyers (up to £300,000)  will deliver a step change in the provision of rented accommodation which is so clearly needed.

The expansion and rebranding of Homes England will be key to Chancellor’s delivery and the investment in skills for construction will be the keys to delivering the 300,000 homes per annum that the government has targeted.  What the Chancellor failed to notice was that last year the housing market delivered 270,000 homes so these new funds which are being made available are to deliver only 30,000 new homes compared to the current market delivery.

The Chancellors’ technological revolution appears to have been forgotten in relation to the construction industry with no mention of any incentives for modern construction methods, which would have enabled the delivery of housing more rapidly.

Homes England

The announcement of the rebranding of the Homes and Community Agency to Homes England and the growth of this body to enable the delivery of planning, homes and money to developers is going to be the key to the Chancellor to delivering many of the measures which he announced. It is only through having an agency to deliver and administrate the many different elements announced; Housing Infrastructure Fund, the Smaller Sites fund and the Estates Regeneration fund and what could turn out to be the most important of all, the Strategic Sites Fund that a comprehensive programme of housing delivery can be achieved. It is certain that the decimation of Local Authority resources make them ill placed to deliver a step change in housing without the assistance of the new Homes England.

What was not clear was how Homes England would enable the planning system to deliver implementable planning consents because it is the Local Authority planning departments that are lacking resource and expertise due to the chronic reduction in funding, and it is this lack of funding which is causing the gap between consent and delivery. When the number of conditions has more than doubled in recent years it is hardly surprising that developers are not able to get on to their sites to deliver new homes.

Was the budget good for housing in the Midlands?

The Devolution deal for the Midlands does open a route forward for the Midlands and will encourage the general economy, the £1.7bn for Transforming Cities Fund in the UK and the £1bn fund of discounted lending for Local Authorities may open up some the larger sites within the region that have been struggling to be delivered. However what is less clear is how easy that fund will be to access and whether that will be linked to the delivery of affordable housing. This is a welcome measure but is likely to have medium to long-term impact given the difficulties which these large sites are encountering when going through a planning system which needs much greater resourcing to operate efficiently.

An emphasis on the urban areas being able to deliver the housing and an increase in the density that is expected is going to be good for the Midlands and the towns and cities within it, however this does need to be matched with the delivery of high quality urban design and place making.

HM Treasury's Quick Guide to the Autumn Budget