Spring Budget 2017: EG’s key takeaways

Chancellor Philip Hammond has delivered his final Spring Budget. EG reports on the announcements that affect real estate and gathers opinions from the industry Bookmark this page to keep up to date with the latest news and analysis KEY TAKEAWAYS FROM THE 2017 SPRING BUDGET Business rates campaigners were left disappointed by a straightforward budget that nevertheless hinted at further details on devolution. Chancellor Phillip Hammond said there would be further devolution arrangements ahead of the six mayoral elections in May, and also revealed new arrangements with London, but business rates were still the centrepiece of his speech. He said there would be further £435m cut in rates, centred around three areas: ■ A £300m fund for discretionary rates relief to be administered by local authorities. This will be allocated on a formula to be released by the Department for Communities and Local Government over a three-year period. ■ Any business coming out of business rates relief will have increases in rate capped at £50 a month ■ A £1,000 discount in 17/18 for pubs valued at less than £100,000. Paul Easton, national head of business rates at Lambert Smith Hampton, said the changes were a damp squib. Hammond reaffirmed that business rates would continue, as all of the £25bn collected each year will go to local authorities by 2020, but he said there would be another government review of the system to be consulted on before the next revaluation. https://twitter.com/JerrySchurder/status/839459690669096968 The London devolution arrangements centred around a memorandum of understanding with the Greater London Authority and government. Measures included: A joint taskforce bringing together the GLA, Transport for London, London councils, HM Treasury, Department for Transport, and Department for Communities and Local Government to explore the options for piloting a development rights auction model on a major infrastructure project in London. Business rates retention: from April 2017, the GLA will take on responsibility for funding TfL’s investment grant and in return the government will allow London to keep a greater share of locally raised business rates, as part of moving towards 100% local retention. The government will explore options for granting London government greater powers and flexibilities over the administration of business rates. Hammond said the Midlands Growth Strategy would be released tomorrow. British Property Federation finance director Ion Fletcher responds to the Budget Other changes announced included: ■ Corporation tax will be reduced to 19%, and reduced to 17% by 2020. ■ Scotland will receive £350m in a devolution arrangement ■ Wales will receive £200m in a devolution arrangement ■ £120m for the Northern Ireland executive ■ Details on the allocation of the £23bn infrastructure fund, with £300m for PhD students and £270m for disruptive technology ■ 16m to create a 5G hub to trial the forthcoming mobile data technology. ■ £200m to support local “full-fibre” broadband network projects designed to attract further private sector investment. ■ Green paper on consumer rights Hammond also said that legislation will be amended to ensure all profits realised by offshore property developers developing land in the UK, including those on pre-existing contracts, are subject to tax, with effect from 8 March 2017. NEWS AND REACTION ■ London devolution looks at new infrastructure funding The new memorandum of understanding on devolution for London announced in the Spring Budget will see a new infrastructure funding model tested in the capital. ■ Responding to new social care measures, James Kingdom, head of alternatives research at JLL, said: “The additional funding for social care is welcome, but more encouraging is that the government is set to look at wholesale reform of how social care is funded as it is clearly no longer sustainable with changing demographic pressures. This could be an opportunity to take the radical action needed to encourage those at retirement age to downsize and manage their potential needs for the future. “Incentives such as removing stamp duty for those downsizing, enabling equity release and allowing families to save efficiently for social care should all be on the table to boost investment in the sector, where demand for improved real estate across all price ranges needs to be addressed.” ■ Deloitte Real Estate has crunched the numbers to reveal the impact of today’s announced business rates changes on small businesses: TYPICAL BUSINESS RATES IMPACT ON SMALL BUSINESS OCCUPIERS Business Rateable value 2010 2016/7 rates Bill New rateable value 2017 New liability under transitional scheme pre budget Liability with budget changes £ Changes announced in The Budget £ £ £ £ £ £ Day nursery 6,100 49 16,500 3,162 649 -2,513 Restaurant 9,000 2,178 14,250 4,665 2778 -1,887 Café 14,000 6,776 9,100 0 0 0 not qualifying for small business relief 14,000 6,776 9,100 5,529 5,529 0 Open Farm 4,250 – 54,000 3,062 600 -2,462 ■ Daniel Watney’s head of rating Debbie Warwick explains why she was disappointed by the Budget ■ Industry misses out on stamp duty While the focus was on business rates for the no frills budget, London agents and developers continued to pile on the pressure for stamp duty reform. Tim Macpherson, head of London, Carter Jonas, explains why. ■ Raised eyebrows for OBR forecast The Office for Budgetary Responsibility forecasts accompanying the Spring Budget may be optimistic, says Colliers International chief economist Walter Boettcher ■ CVS chief executive Mark Rigby has welcomed the small business rate relief measures announced by the chancellor today. He said: “Our three requests to the Secretary of State were to help those 25,000 small firms exiting small business rate relief after 7 years and provide protection which the current transitional relief scheme failed to do. @We specifically asked for discounts to rates bills for pubs- who have seen their numbers fall by over 11,000 during the current tax regime- and, finally, we asked for targeted relief to be made available for those businesses most in need and experiencing significant hikes. “Those demands have been met in full and both the chancellor and secretary of state should be congratulated on listening to the concerns of small business but, more importantly, acting upon those concerns with meaningful financial help.” ■ Ellandi investment manager Jonathan Cole explains why there are no real winners in the business rates saga ■ No detail on mechanism for discretionary relief Bryan Johnston, real estate litigation partner at law firm Dentons, said: “The measures announced today about business rates are very much aimed at small businesses. There is no detail as yet on the mechanism for discretionary relief in respect of business rates hardship.  The package is by its nature reactionary and does not address the fundamental reasons as to why industry is up in arms about the 2017 revaluation.” Rates show ‘spectacular lack of ambition’ Jerry Schurder, head of business rates at Gerald Eve, says Chancellor has missed a gilt-edged opportunity to grasp teh nettle of business rates reform, warning UK plc will suffer   JUST 4% OF PUBLIC SECTOR RECEIPTS COMES FROM BUSINESS RATES ■ BUSINESS RATES: from the Budget statement At Budget 2016 the government announced reductions in business rates worth almost £9bn over the next five years. This included permanently doubling small business rate relief and extending the thresholds of the relief to ensure that 600,000 businesses will not pay business rates again. The business rates revaluation takes effect in England from April 2017. In addition to the £3.6bn transitional relief which was announced in November 2016, the government will provide £435m of further support for businesses facing significant increases in bills from the English business rates system. This includes: support for small businesses losing small business rate relief to limit increases in their bills to the greater of £600 or the real terms transitional relief cap for small businesses each year providing English local authorities with funding to support £300m of discretionary relief, to allow them to provide support to individual hard cases in their local area. The government will also introduce a £1,000 business rate discount for public houses with a rateable value of up to £100,000, subject to state aid limits for businesses with multiple properties, for one year from 1 April 2017. Local government will be fully compensated for the loss of income as a result of these measures. At Budget 2016 the government announced an aim to deliver more frequent revaluations of properties – at least every three years. The government will set out its preferred approach for delivering this aim at Autumn Budget 2017 and will consult ahead of the next revaluation in 2022. Stamp duty land tax – As a result of consultation, the government will delay the reduction in the filing and payment window until 2018-19. Offshore property developers – The government will amend legislation to ensure that all profits realised by offshore property developers developing land in the UK, including those on pre-existing contracts, are subject to tax, with effect from 8 March 2017. Rent-a-room relief – The government will consult on proposals to redesign rent-a-room relief, to ensure it is better targeted to support longer-term lettings. This will align the relief more closely with its intended purpose, to increase supply of affordable long-term lodgings. https://twitter.com/JerrySchurder/status/839458511184613376 Hammond reveals small business rates relief Philip Hammond has set out how he intends to soften the blow of the 2017 business rates revaluation for small businesses.  The ones to watch in the Spring Budget The Spring Budget is expected to be more safe sailing than rocking the boat. Just weeks before the government is due to trigger Article 50, chancellor Philip Hammond will be trying to avoid adding to the economic uncertainty. Business rates relief will be the the big one to watch for the property sector, with rates relief promised for those hardest hit. But will it go far enough? Click here for EG’s five ones to watch from tomorrow’s announcement… EG’s 2016 Budget round-up George Osborne’s final budget as chancellor and its implications for property Brexit: what happens now? As bond yields slid to record lows, housebuilders’ share prices tumbled and a number of development projects were reassessed, EG analysed what it meant for the property industry SPRING BUDGET ANNOUNCEMENTS FOR PROPERTY Click here to read the Hammond’s Budget speech in full Click here to read the Spring Budget document in full ■ 1pm: “He has failed to listen” – commenting on the business rates changes, David Jones, senior director at GVA said: “The chancellor has simply not listened to the majority of business facing significant uplifts from the 2017 revaluation. “Pre-budget GVA laid out a strong case for the government to find £1.75bn to help alleviate business concerns. This was principally through capping liability increases for all business to revert back to no higher 12.5%, rather than the current cap of 42%. “However, the chancellor only committed to cut business rates by an additional £435 million through targeting small business, pubs and specialist hardship cases.” “Pre Budget hype promised so much more from this chancellor. He has failed to listen. For a tax system to impose on the worst affected a 42% increase in their liability and so clearly differentiate between small and all other businesses, is in our view inequitable. “The devil will be in the detail as to the rules for distributing the hardship fund. However, we have real concerns as to whether local authorities will fairly distribute the additional £300m hardship relief fund. “We simply don’t believe that relief in a tax system be based on those that shout loudest.” ■ 1pm: “A bit of a damp squib” – Paul Easton, national head of business rates at Lambert Smith Hampton said: “There have been increasingly loud calls in the press for the chancellor to help businesses and protect them from business rates increases due to the 2017 revaluation. Listening and responding he announced that small businesses will benefit from this budget, but the measures he has announced are a bit of a damp squib.” “These measures are certainly welcome but there’s no help for many businesses facing big increases in their business rates. Nor any help for those who were hoping for reduced rates bills over and above what we already know. The pain will continue.” ■ 1pm: Responding to the business rates relief announcement, Debbie Warwick, head of rating at property consultancy Daniel Watney, said: “The support for businesses losing small business rates relief, ensuring that none will see an increase of more than £600 a year, is long overdue and brings the transitional system in England more in line with the fairer Welsh system in supporting smaller businesses. “However, it is vital that the changes to rates reforms indicated by the chancellor also see the damaging “reasonable professional judgement” clause scrapped. The clause means genuine appeals within a margin of error can be thrown out, even if a rates bill is wrong. “Thirteen trade bodies have come together to tell the government that it is crucial this element of the reforms is removed, as it will wholly undermine confidence in the tax system and thousands of firms could be sent out of business.” https://twitter.com/LouisaClarence/status/839464332421365761 ■ 1pm: Hammond reveals small business rates relief Philip Hammond has set out how he intends to soften the blow of the 2017 business rates revaluation for small businesses.  ■ 1pm: Graham Shone, senior analyst, EG, says: “Probably the most I’ve ever heard business rates *specifically* discussed during a Budget speech but proper reform still feels a way off. Philip Hammond said they will “set out a preferred approach” and “consult” for reform by the next revaluation but 2022 is a long way away “Especially when you consider the rapidity of change. Perhaps the ‘digital tax’ mentioned may help rebalance things in the interim. And although the tax is “fiscally neutral” – the issue is that it isn’t “market neutral”. CRE Values could fall hugely – Outturn wouldn’t.” ■ 12.57pm: A £300m fund has been announced for local authorities to provide rates relief. ■ 12.53pm: Chancellor: “Smoother and more frequent” bizrates revaluations to avoid dramatic hikes ■ 12.51pm: Business rates can’t be abolished. “There is scope to reform” the system. ■ 12.50pm: Corporation tax will fall to 19% and then to 17% – the lowest in the G20. ■ 12.48pm: Hammond: A strong economy needs a “fair, competitive” tax system. ■ 12.44pm: Chancellor Hammond’s budget is under way: economic forecasts are mostly unchanged, up to 2% by 2021. RELATED ARTICLES Industry reacts to the Autumn Statement 2016 A win for housing associations, letting fees banned, £3.2bn for London – news, analysis and reaction from Hammond’s announcements