Social housing sector developments

The government’s long-promised overhaul of UK consumer credit regulation has commenced. The Consumer Credit Act 1974 is to be replaced with a more outcomes-focused framework under the supervision of the FCA. The key proposals include:

• Information – a repeal of all CCA information requirements which govern the content and timing of communications to consumers – to be replaced with a regime which prioritises good outcomes for consumers.
• Sanctions and Criminal Offences – proposes the removal of CCA sanctions and criminal offences (which it deems so harsh as to be rarely if ever used) and replaced with a system of fines and redress mechanisms.

A review the legislative scope of regulation and review of key consumer rights are to be considered as part of a second phase in 2026.

Until recently there has been an issue as to whether actuaries should account for matters raised through the Virgin Media case, and for those responsible for the preparation of the financial statements to assess whether there is the need for any provision or disclosure to be made with regards to this case.

On 5 June 2025 the Department for Works and Pensions announced that the Government will introduce legislation to deal with the issue arising from the Virgin Media v NTL Pension Trustees judgement which has increased uncertainty in the pensions industry. The legislation will “give affected pension schemes the ability to retrospectively obtain written actuarial confirmation that historic benefit changes met the necessary standards. Scheme obligations will otherwise be unaffected and the Government will continue to maintain its robust framework for the funding of defined benefit pension schemes in order to protect people’s hard-earned pensions.”

In our opinion this update removes any uncertainty in this area.

A Law Commission consultation has recently finished on proposed changes to the Co-operative and Community Benefit Societies Act 2014. Key issues discussed within the Consultation include:

• Whether there should be new legal definitions of co-operative and community benefit societies, to narrow the discretion of the Financial Conduct Authority (FCA) in registering new societies;
• Whether charitable community benefit societies should cease to be exempt charities;
• Changes to the law governing the issue of shares by societies; and
• That directors’ duties as set out in the Companies Act 2006 should also apply to board members of co-operative societies and community benefit societies

Of the above proposed changes the most potentially significant to relevant RPs is in relation to the removal of exempt charity status for charitable CBSs, requiring them to register with the Charity Commission which would then become the lead regulator rather than the Regulator of Social Housing. This may in turn have implications around asset disposals and intra-group loan arrangements (entities regulated by the Charity Commission must apply to it for permission in such situations).

A summary of the consultation can be found at: Law Commission – Review of the Co-operative and Community Benefit Societies Act 2014

It is expected that responses to the consultation will be used to develop a final report which is expected to be published during 2025.

Ministers recently announced that the Procurement Act 2023 will come into effect in February 2025 which means that the rules that shape how public bodies buy goods and services will change. According to the Cabinet Office, the Procurement Act 2023 will “introduce measures to improve and streamline the way procurement is conducted and benefit prospective suppliers of all sizes, particularly small businesses, start-ups and social enterprises.”

Whilst a number of concepts and requirements will stay the same, for example a list of “exempt contracts” is retained and the range of remedies available for disappointed suppliers remains broadly similar, there are a number of potentially substantial changes including;

• A smaller number of less prescriptive procurement procedures being available. RPs can choose from “direct award”, “competitive tendering procedure” and “awarding under an existing framework”. A light touch regime for certain service contracts (deemed to be of lower interest to cross-border competition) is retained and rules will apply to specific “below threshold” opportunities
• The scope for assessing tender submissions has changed from the “most economically advantageous tender” to the “most advantageous tender”. This will enable RPs to better align the tender process with their objectives
• RPs must set and publish at least three key performance indicators (KPIs) before entering into a public contract for more than £5 million, unless the RP is awarding a framework, concession contract or light touch contract, or the RP considers that KPIs are not appropriate to assess the supplier’s performance
• The mandatory standstill period is reduced from 10 days to 8 days

Procurement Act 2023 - Guidance documents - GOV.UK

In September 2024 the government published the Renters’ Rights Bill replacing the Renters (Reform) Bill which fell with the last government. The Renters’ Rights Bill aims to “provide tenants with greater security and empower them to challenge bad practice give private rented tenants greater protections and whilst most of the changes relate to the PRS some parts of the new Bill will relate to RPs because they use assured tenancies. The Bill is currently due to go through Report Stage in the House of Commons in January before moving to the House of Lords. Proposals under the Bill include;

• The removal of fixed-term assured tenancies, and instead all assured tenancies will be periodic, with rent periods of the tenancy being either monthly or no more than 28 days
• The Bill provides that tenants can serve a 2 month notice to quit to terminate their tenancy, which is longer than the one month most tenancies prescribe. Such notice must be in writing, but the landlord cannot dictate a prescribed form.
• The Bill removes provisions of the Housing Act 1988 which establishes assured shorthold tenancies, abolishing section 21 “no fault” evictions for new and existing tenancies

Most key reforms are expected to be implemented by Summer 2025.

Renters' Rights Bill - Parliamentary Bills - UK Parliament

In 2023 the UK Government introduced the Economic Crime and Corporate Transparency Act (the Act) with the aim of reducing economic crime in the UK. Key aspects of the Act include;

• The introduction of a new corporate offence for companies failing to prevent fraud
• New powers to Company’s House to clean up the company’s register (for example Companies House will now be able to remove invalid office addresses)
• Strengthening of anti-money laundering powers, giving firms the confidence to share information on economic crime; and
• The introduction of new proactive intelligence gathering powers for law enforcement

In respect of the failure to prevent fraud offence, whereby organisations may be held to account where a person associated with the organisation commits fraud with the intention of directly or indirectly benefitting the organisation (the Offence), the government released guidance in November 2024 which gives organisations time to prepare and implement fraud prevention procedures before the Offence comes into effect on 1 September 2025.

The Offence has been created with a view to ensuring that organisations will be criminally liable if they benefit or profit from fraud committed by an associated person such as employee or agent. Types of fraud covered by the Offence include: fraud by failing to disclose information, false accounting, false statements by company directors and fraudulent trading, amongst others.

The legislation applies to “large organisations” as defined in the Companies Act (i.e. those organisations meeting two or more of the following criteria below in the year preceding the base fraud offence:

• More than 250 employees
• More than £36 million turnover
• More than £18 million in total assets

Importantly the Act replaces the common law “directing mind and will” test for corporate criminal liability with a statutory “senior manager” test making it easier to prosecute large organisations with numerous levels of management. If a senior manager is acting within the actual of apparent scope of their authority commits a relevant offence, the organisation is also guilty of the offence.

Section 199(12) of the ECCTA sets out potential sanctions and set out that certain offences could potentially lead to unlimited financial penalties.

The guidance published in November 2024 sets out the key considerations for organisations in the development of their fraud prevention procedures and defines six principles which should inform organisations in the development of their fraud prevention framework (which mirror those set out under previous corporate criminal failure to prevent offences such as bribery and the facilitation of tax evasion). The principles are;

• Top level commitment
• Risk assessment
• Proportionate risk-based prevention procedures
• Due diligence
• Communication (including training); and
• Monitoring and review

Organisations should incorporate this guidance into their fraud prevention frameworks (including any read-across from that in place in respect of the guidance on fraud, bribery and tax evasion).

Economic Crime and Corporate Transparency Act 2023

Analysis from Tim Robinson a partner in Crowe’s Cyber Security and Counter Fraud team estimates annual losses to fraud in the UK of £219Bn supporting the government’s determination to get Directors to focus their attention to improving risk management and control processes in this area.

Annual Fraud Indicator

Companies House Reform

The Economic Crime and Corporate Transparency Act also details a number of significant forthcoming changes to Companies House reforms, including;

• Improved data quality – enhanced powers to query information and request supporting evidence, stronger checks on company names, and new rules for registered office addresses
• Identity Verification – phased introduction of identity verification for anyone setting up, running, owning or controlling a company in the UK
• Confirmation statement changes – new requirements to provide registered email address and confirm that the company’s future activities will be lawful
• Increased fees – higher fees to cover new future expenditure and recover costs from current expenditure
• Authorised Corporate Service Providers (ACSP) – Third party providers can register as ACSPs to carry out identity verification checks on behalf of clients
• Protecting personal information – individuals can apply to suppress personal information from historical documents
• Transparency of Company Ownership – new requirements for additional shareholder information and restrictions on the use of corporate directors; and
• Enhanced Investigation and Enforcement Powers – more effective powers for Companies House to investigate and enforce regulations, and new powers to share data with law enforcement agencies and other government departments

In respect of Authorised Corporate Service Providers (ACSP) detailed above, our Company Secretarial team is currently registering with Companies House as an ACSP and will commence providing this service later in the year. Please contact Janak Prajapati if you require any further information in respect of this.

In May 2024 the Leasehold and Freehold Reform Act passed into law. A number of the more radical proposed changes, such as replacing residential leases with an alternative, improved version of commonhold, or for the removal or capping of existing ground rents, did not make it into the statute book. Whilst some relatively small changes have come into force such as amendments to the Building Safety Act, most of the act is expected to take force in 2025-2026, through secondary legislation and there is no prescribed timeline for their implementation.

A number of the key proposed changes for 2025-2026 include;

• Making it easier and cheaper for leaseholders to buy their freehold
• Increasing the standard lease extension terms to 990 years for houses and flats
• Scrapping the requirement for a new leaseholder to have owned their house for two years before they can buy or extend their lease
• Extending regulations to estate rent charges (freehold service charges) with the same protections
• Banning the sale of new leasehold houses other than in exceptional circumstances; and
• Providing leaseholders with help in taking over the management of their property is they decide to do so

Aside from the above, the main (proposed) changes are to the service charges regime itself. These include;

Extension of the service charge regime to fixed service charges

Currently the 1985 Act applies only to variable service charges. The Act proposes that it will also cover fixed service charges.

Notice of future service charge demands

• New requirement to serve a “future demand notice”
• Must be in the prescribed form
• Must contain specified information

Service Charge Demands

• There is to be a prescribed form of demand
• The following sections are to be repealed
  • 21 (request for summary of relevant costs)
  • 21A (withholding of service charges)
  • 21B (notice to accompany demand for service charges)
• The new demand will have to be in the specified form, contain specified information and be provided to the tenant in a specified manner

Accounts and Reports

• There is to be a new requirement for a statement of account (where 3 or more tenants) which must be certified by an accountant (to be provided with 6 months of the end of the period of the service charge accounts)
• A new requirement for annual reports (to be provided with 1 month of the end of the period of service charge accounts)

Right for tenants to obtain information on request

• Tenants will have a right to make a request for information (which includes documentation)
• Landlords may be required to seek information from third parties
• Costs can be charged for giving information or providing copies of documents

New enforcement methods

• Non-compliance no longer a criminal offence
• Tenants can apply to Tribunal on grounds that
  • Demand to demanded correctly
  • Report not properly provided
  • Information not provided
• Tribunal can make various orders including
  • That the demand or report is made correctly
  • That the information is provided
  • That a Landlord pay damages in relation to non-compliance up to £5,000

Duty of Landlords to produce and publish administration charge schedules

• A new duty is proposed requiring Landlords to produce and publish “Administration Charge Schedules”
• The current requirement to serve notices with administration demands would be scrapped
• A Landlord would be required to provide each tenant with a copy of the Schedule
• An administration charge not set out in the Schedule would not be recoverable
• A tenant could apply to a Tribunal in respect of breaches of duty
• The Tribunal could order the Landlord to pay damages up to £1,000

Leasehold and Freehold Reform Act 2024

As set out above there are a number of issues that housing providers will need to assess including potential changes to the number and way that service charge statements are compiled, reported and certified. Chirag Shah who heads our Grants and Assurance team will be able to assist further if required.

On 27 March 2024 the Financial Reporting Council published amendments to FRS102 The Financial Reporting Standard applicable in the UK and Republic of Ireland – Periodic review 2024 (FRS102). The resultant changes to the Housing SORP are currently being assessed by the Housing SORP Working Party with involvement from the FRC. A 12 week consultation on the proposed changes is due to be conducted in early 2025 to enable a new SORP to be published in the Summer of 2025, effective for periods commencing on or after 1 January 2026. This means providers with a 31 December 2026 year end must produce compliant accounts with comparatives and opening balance sheets.

Under the proposed amendments there are potentially significant changes to revenue recognition and leases to align FRS102 with International Financial Reporting Standards (IFRS).

The new FRS102 Section 23 for revenue recognition will introduce a five-step revenue recognition model aligned with IFRS15 (with some simplifications), potentially altering how revenue is recognised. The five steps are;

• Identify the contract with the customer
• Identify the contractual performance obligations
• Determine the amount of consideration/price for the contract
• Allocate the determined amount of consideration/price to the contractual obligations
• Recognise revenue when the performing party satisfies the performance obligation

Key aspects of the above include identifying performance obligations, and assessing whether there is currently a difference between the performance of a service, and when sums are billed in relation to that service. In this respect we consider it less likely that there will be a difference between the current and forthcoming accounting treatment for rental income (charged weekly or monthly as a customer makes use of the asset) compared to variable service charges for which there is often an under/over-recovery charged/refunded at a later period after service charge accounts have been reconciled. We do however ask that providers consider in particular the treatment of “cut-off” of rental income around the year end as the current practice of some providers is to have either a 52 or 53 week rental year which is not likely to meet the above tests.

Under the new FRS102 Section 20 (and new Housing SORP), almost all lessees will need to include leases on their balance sheets, recognising a right-of-use asset (ROU) and a corresponding lease liability. The ROU asset is based on the present value of the lease liability and these changes replace the operating lease expense with depreciation on the ROU asset and a finance charge on the lease liability.

These changes will be most significant for lease based providers and others with significant lease liabilities and will impact EBITDA and other key performance indicators.

Providers should have already done an impact assessment, begun the process of identifying leases and reviewing key income streams.

Crowe act as Technical Advisor to the Housing SORP Committee and we would be happy to discuss these forthcoming changes with you in more detail.

FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland

You can find out more about this topic in our webinar: Changes to Financial Reporting Standards and the Housing SORP.

HMRC has announced a change in its policy towards a VAT planning arrangement that has been entered into by a number of care providers. Representatives of the sector are lobbying HMRC to reverse or limit the scope of this change, but if upheld it will increase costs for such care providers. This will affect housing associations that either provide care directly and/or partner with care providers.

In her first Autumn Budget, the Chancellor announced an increase in employer’s NIC from 13.8% to 15% starting in April 2025. The threshold at which this become payable was also reduced from £9,100 to £5,000, capturing more part-time workers. There were also significant increases in the National Minimum Wage.

The construction, management, repair and maintenance of housing remain labour-intensive activities, and this will clearly lead to an above-inflation increase in both staff costs but also the charges RPs should expect to receive from many suppliers.

For those RPs that provide care and support services, or work closely with other organisations doing this, that sector is going to be particularly hard hit by these changes. Other labour-intensive industries such as hospitality may find it is no longer viable to keep certain branches open, which could lead to commercial tenants seeking to terminate their leases and residential tenants becoming unemployed.

These changes need to be factored into budgets and long-term business plans, and into discussions with commissioning bodies. We are seeing a range of (draft) outcomes from clients based on their initial discussions with commissioners from a 0% increase for a few, to more ameliorative increases of between 6-8%.

The SDLT surcharge on second homes was increased from 3 to 5% in the Autumn Budget. Coupled with the ending of Furnished Holiday Letting regime in April 2025, this may reduce competition for homes in certain areas. Suggestions of further increases in capital gains tax for residential property in the future may also encourage more smaller private landlords to exit the sector.

Coming on top of the removal of multiple dwellings relief by the previous administration, this makes it even more essential that RPs are able to claim SDLT exemptions such as RSL or charities reliefs.

SDLT reliefs are reducing for first time buyers from April, as is the nil band for other purchasers. These changes may put some downwards pressure on shared ownership prices which providers should assess as part of their budgeting and forecasting processes.

The new government has issued guidance accelerating the remediation of unsafe housing. At this stage it is unclear whether this will include any VAT reliefs.

Currently we are still awaiting a formal policy announcement from HMRC, but from informal discussions HMRC continue to resist suggestions that cladding remediation and other essential safety improvement works can be zero-rated, either as snagging to the original construction works or as the installation of new insulation. HMRC officers are accepting that the VAT incurred relates to future development activity in some circumstances, so for those RPs developing some homes for sale there may be scope to recover VAT incurred.

We recommend any RP affected review the VAT treatment it has adopted and potentially make protective claims should these issues be litigated.

Cladding and other fire safety works – information for residents - GOV.UK

With planning changes being enacted additional sites may become available. RPs seeking to agree a call option over these sites, and potentially share the benefits of successful development via overage payments, should be careful about the owner’s ability to opt to tax the site. HMRC’s policy towards call options and overage payments is under review and this is a complex area on which advice should be sought.

Many RPs are examining ways to create additional homes out of their existing stock; whether through demolition and new build, repurposing underperforming assets, or extending existing buildings. There are a number of VAT reliefs available which should be reviewed.

RPs with a three-figure development pipeline or potentially building for open market sale should consider whether they have the appropriate subsidiaries in place; or if they do, whether their procedures manuals for using these are up to date.

Developments are now subject to Biodiversity Net Gain requirements. The tax treatment of strategies to achieve this can be complex, and HMRC’s policy in this area is still emerging. Advice should be sought where relevant.

From February 2024, some additional items were added to the list of energy saving materials, the installation of which qualifies for zero-rating.  However, the list remains limited and omits popular thermal improvement measures such as double glazing and thicker doors.  Lobbying continues for a wider definition and a more pragmatic approach where these works are undertaken as part of a wider refurbishment.  In the meantime, RPs should budget for any programme in line with existing treatments and ensure that suppliers charge lower rates of VAT where they can.

In her Autumn Budget the Chancellor announced the recruitment of a further 5,000 compliance staff at HMRC. HMRC enquiries into specific tax returns and general inspections continue to rise in frequency and extent. Particular issues have been: -

• The application of the reverse charge to self-account for VAT, both on purchases from abroad and on domestic purchases of mobile phones and some construction services
• CIS inspections of suppliers leading subcontractors to lose gross payments status for CIS. Organisations should periodically reconfirm this status before paying subcontractors net.

HMRC has published Guideline for Compliance 8 setting out the procedures they would expect to see in place for VAT compliance. While clearly not all measures are relevant to RPs, and HMRC acknowledges that procedures need to be tailored to the size and complexity of the organisation, we recommend all RPs to compare this to their own processes.

Within the Autumn Budget, it was formally announced that the mandatory payrolling of benefits will go ahead from April 2026. The proposed changes will affect all employers who provide employee non-cash benefits and will be of particular importance to businesses caught by the Senior Accounting Officer regime. Employers who process their payroll in-house will need to put in place processes to ensure that benefit-in-kind (“BIK”) data flows to the payroll function in real time. Our Workforce Advisory experts across HR advisory and Taxes will be able to assist you further if you have any queries in this area. Please contact Glen Huxter for more information and advice.