Chancellor Reveals Post-COVID Economy Plans in Autumn Budget

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27 October 2021

As Rishi Sunak sets out his departmental spending, new fiscal rules and public service plans – what are the main takeaways for the commercial property industry?

Delivering the Budget and Spending Review on 27 October, Chancellor of the Exchequer Rishi Sunak said:

“Today’s Budget delivers a stronger economy for the British people: stronger growth, with the UK economy recovering faster than our major competitors. Stronger public finances, with our national debt finally under control. Stronger employment, with fewer people out of work and more people in work. Growth up, jobs up, and debt down: let there be no doubt – our plan is working.”

 

More Funding for the NHS Estate

 

Rishi announced that £2.3 billion over the next three years will be spent on NHS diagnostic services with at least 100 community diagnostic centres across England.

£1.5 billion will be used for new surgical hubs, increased bed capacity and equipment to help elective services recover, including surgeries and other medical procedures.

 

The National Living Wage and Apprenticeships

 

From 1 April 2022, the National Living Wage will increase by 6.6 per cent to £9.50 an hour. Young people and apprentices will also see pay increases as the National Minimum Wage rates will also increase next April.

Apprenticeship funding will be increased in England to £2.7 billion in 2024-25.

 

Business Support

 

The government is freezing the business rates multiplier for a further year, a tax cut worth £4.6 billion over five years.

There will be new investment incentives in England totalling almost £750 million, including tax relief for eligible green investments and a new ‘business rates improvement relief’.

A new investment relief plan also means businesses can make property improvements, such as installing air conditioning or solar panels and pay no extra rates for 12 months.

 

Tax and REITs

 

The government are making changes to the rules applying to real estate investment trusts (REITs). The changes remove certain constraints and administrative burdens which are "no longer necessary" and "outdated"

Taking effect from1 April 2022, the measure makes amendments to the tax rules applying to REITs including some of the conditions that determine whether a company qualifies to be a UK REIT.

There are currently 92 REITs in the UK. The objective of the new measures is to alleviate certain constraints and administrative burdens to enhance the attractiveness of the UK REIT regime for real estate investment.

In particular, the changes will:

 

• Remove the requirement for REIT shares to be admitted to trading on a recognised stock exchange in cases where institutional investors hold at least 70 per cent of the ordinary share capital in the REIT
• Amend the definition of an overseas equivalent of a UK REIT so that the overseas entity itself, rather than the overseas regime to which it is subject, needs to meet the equivalence test
• Remove the ‘holders of excessive rights’ charge where property income distributions (PIDs) are paid to investors entitled to gross payment
• Amend the rules requiring that at least 75 per cent of a REIT’s profits and assets relate to property rental business (the ‘balance of business test’) to disregard non-rental profits arising because a REIT has to comply with certain planning obligations, and to ensure the items currently specified as excluded from the profits part of the test are disregarded in all parts of the test
• Introduce a new simplified balance of business test so that, if group accounts for a period show that property rental business profits and assets comprise at least 80 per cent of group totals, a REIT will not have to prepare the additional statements which would be required to meet the full test

 

Also as of 1 April 2022, the government will introduce a new Residential Property Developer Tax on company profits derived from UK residential property development. The tax will be charged at 4 per cent on profits exceeding an annual allowance of £25 million and will be included in the corporation tax returns of those companies liable to the new tax.

Investment in Wales, Scotland and Northern Ireland

 

Rishi also named several specific projects that will be receiving financial support:

• Accelerated funding for the Cardiff City Region Deal to fast-track support, including for advanced manufacturing capability in the region.
• £172 million from the Levelling Up Fund for 8 projects in Scotland including the redevelopment of Inverness Castle, renovation of the Westfield Roundabout in Falkirk, and a new marketplace in Aberdeen City Centre.
• A Veterans Commissioner for Wales, who will work to improve the lives and opportunities of the Welsh veterans’ community, recognising their contribution to UK Armed Forces.
• The establishment of new trade and investment hubs in Cardiff and Belfast and the expansion of the existing trade and investment hub in Edinburgh, ensuring the benefits of the UK’s global trade policy are channelled across the UK.
• A further £8 million from Project Gigabit to deliver full fibre broadband to 3,600 premises in Scotland including Aberdeenshire, Angus, Highland, Moray and Perth and Kinross.
• £49 million from the Levelling Up Fund for 11 projects across Northern Ireland including an Electric Vehicle charging network across the country, the redevelopment of a derelict Ministry of Defence site in Derry/Londonderry into an urban community farm, and improved sports facilities in Portrush.

 

Roads and Transport

 

£2.6 billion will be invested in over 50 local road upgrades in England and over £5 billion for local roads maintenance. Fuel duty rates will be frozen UK-wide for the 12th consecutive year.

£6.1 billion is to be allotted to back the Transport Decarbonisation Plan, boosting the number of zero-emission vehicles. Rishi also confirmed £355 of new funding for zero-emission buses.

For those travelling by air domestically, a 50 per cent cut in Air Passenger Duty will apply for flights between airports in England, Scotland, Wales and Northern Ireland.

Picture: a photograph of Rishi Sunak

Article written by Ella Tansley | Published 27 October 2021

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