Changes to property taxation – Budget 2018

Main changes announced or confirmed yesterday in the Autumn Statement

For individuals;

• Currently individuals can claim lettings relief against any gain realised on the sale of a residential property where it has been their home and they have also let it out. From April 2020, lettings relief will only be available for any period where you lived in the property with the tenant. In addition to this, the government have announced a reduction in the deemed period of occupation from the last 18 months to the last 9 (with some exceptions for individuals with disabilities or moving into care homes). This is the second reduction in this deemed period as it used to be 36 months.
• SDLT first time buyer relief is being extended to include purchases under the shared ownership scheme. A retrospective claim can be made where an individual purchaser would have qualified for the relief before the rules came in.
• On account Capital Gains Tax payments following the sale of a residential property will come into force from 6 April 2020.

Non-resident matters;

• The government are proposing to introduce a further 1% surcharge rate of SDLT on the purchase of English and Northern Irish residential properties by non-resident buyers
• On account Capital Gains Tax payments following the sale of residential property will come into force from 6 April 2019
• UK property income for corporate owners will fall under the Corporation Tax regime from 6 April 2020 (currently they are taxed under the Income Tax rules)
• The above will mean non-resident corporate landlords could become subject to the Corporate Interest Restrictions which could prevent them from claiming full tax relief on their finance costs in the year it is incurred.
• Non-resident persons will be liable to either CGT (individuals) or Corporation Tax (companies) will become payable on the sale of any UK land. These rules currently only apply to residential property.
• The indirect sale of UK land by the same persons will also be caught by these rules.

Corporate and business property owners;

• Structure and Buildings Allowance (SBA) will be available on the cost of any non-residential qualifying structure (not land) for expenditure incurred after 29 October 2018. This is a 2% straight line writing down allowance. The allowance is in additional to capital allowances which can be claimed on qualifying fixtures within properties. This will be available to any corporate property owner who uses the property for their own business including a UK property business.
• The Annual Investment Allowance (AIA) will temporarily increase from £200,000 to £1m from 1 January 2019 to 31 December 2020 allowing a significant increase in tax relief on qualifying CAPEX
• Writing Down Allowances on the special rate pool is to reduce from 8% to 6% from April 2019. This will mean the rate in which businesses can claim capital allowances on integral features and other special rate items (high emission cars) will increase taking a business longer to fully recover the cost of these items.
• The Corporate Loss Restrictions (for companies only) are to be applied to capital losses in the same way as income losses. For companies with significant brought forward capital losses this could restrict the amount of losses which can be claimed in any one year.