Autumn Statement 2023: Impact on Real Estate

From a real estate perspective, the Autumn Statement was light in respect of specific changes. There was welcome news for retail, hospitality and leisure occupiers as the business rate relief will be extended for a further year to 2025. This provides up to 75% relief up to a cash cap limit of £110,000 per business. In respect of planning reform, the Chancellor announced for critical infrastructure projects and major development, the opportunity to pay for guaranteed delivery dates with a refund where these dates are not met. The industry however does need long-term solutions, properly resourcing the local authorities to ensure planning applications can be reviewed more quickly regardless of the size of the project.

There was a commitment of an additional £32 million to help tackle the backlog of housing approvals and the extension of permitted development rights to convert two dwellings from one existing dwelling. However, there was no commitment or appetite for substantially reforming the business rates system and/or the planning system, which both systems are crying out for. Instead, the government has continued with the sticking plaster approach.

Interestingly, there was no mention of further support to businesses to adapt their buildings so that they are suitable for purpose in a net zero carbon environment. The government could have used the opportunity to incentivise green investment. Particularly by focusing on tax incentives above the line i.e. tax credits as this will help landlords and developers undertaking retrofit projects given that they are more concerned with raising capital rather than a tax break on future profits, such as that is offered with full expensing tax relief that was announced.

Full expensing

We welcome the announcement that full expensing will be permanent as it creates a more stable regime which would enable greater account to be taken of capital allowances in decision-making. The complexity of and continued change to the capital allowance system, means many clients do not have current knowledge of the system, and thus it is too difficult to factor into investment decision process. Although we note, full expensing is only relevant to the 1% of companies/groups whose qualifying expenditure exceeds £1 million a year, which already benefits from full relief under Annual Investment Allowance (AIA).

Full expensing is only available for expenditure on plant and machinery (expenditure on buildings, structures and land will not normally be eligible). There are also some notable exclusions, such as cars, as well as many assets used for leasing (leasing excludes property assets that will be leased). Business do have to watch out for the fact the disposal of an asset on which full expensing was claimed will give rise to a balancing charge if proceeds are received (unlike where AIA was claimed, where the proceeds will be factored into the capital allowances pool). Therefore, they may incur higher tax charges in future than they may be expecting given that the full proceeds received will be taxed in the period.

Freeports and investment zones

In an attempt to further incentivise investment and commercial activity in specific parts of the UK with high growth potential, the Autumn Statement provided a time extension to freeport zones (seaports and airports) and investment zones (brownfield sites). This is attractive for business as they offer generous tax breaks in respect of customs duties, VAT, Stamp Duty Land Tax (SDLT), capital allowances and employer national insurance contributions.

The government announced the end (sunset) date for the Freeport tax reliefs will be extended by five years from 30 September 2026 to 30 September 2031 for Freeports in England. This extension is subject to delivery plans for each Freeport hence it will be legislated once the delivery plans for each Freeport have been agreed. Similarly, the investment zones tax reliefs has been extended from five to ten years ending 30 September 2034. The extension is subject to delivery plans agreed with the Department for Levelling Up, Housing and Communities (DLUHC) and HM Treasury. It will be legislated in 2024 and continued work will be done by the UK Government to extend investment zones and Freeports in the devolved nations, Scotland and Wales.

Annual Tax on Enveloped Dwellings (ATED)

Notably, the government has announced the annual chargeable amounts for ATED will be uplifted by the September CPI figure of 6.7% for the 2024/2025 ATED charging period.  We have set out below the old rates and the revised rates that will apply for 2024/2025. 

How we can help

Crowe can help assess how the announced tax changes can impact your business and assess the tax incentives available by bringing together real estate tax experts that will provide an understanding on the interplay of these tax regimes at every stage of your business cycle. For further information, please contact Caroline Fleet, or your usual Crowe contact.