A budget briefing for members
This year’s Budget had some unexpected surprises in store for the construction industry, from a cut on corporation tax to removing the zero rating for alterations to listed buildings. Here are some of the main points that may well impact upon the industry…
An additional 1% reduction in the main rate of Corporation Tax was announced. The rate will go down from 26% to 24% in April 2012, then to 23% in April 2013 and to 22% in 2014.
A new Stamp Duty rate of 7% on residential property selling for over £2,000,000 is to be introduced. There will also be an attempt to levy Stamp Duty from companies and trusts buying residential property for over £2,000,000. The rate to be charged is 15%. This is punishing if it works and will technically be difficult legislation in practice.
The registration threshold will go up to £77,000 from April 2012.
The Tax Dashboard
Hidden amongst the press releases is a reference to the Tax Dashboard, which is much better news. This will be launched in mid April and will provide every trader with access to see all the taxes they have paid and all the tax they owe. It is going to be a great help and will be well worth a look. Visit the HMRC website and log in after the middle of April and just explore, you will be impressed with the help it offers. The Joint Taxation Committee, of which B&ES is a member, has worked with HMRC to design it.
R&D tax credit
The Government has announced that an 'above the line' tax credit for larger companies involved in research and development (R&D) will be introduced from April 2013.
The credit will be a minimum rate of 9.1% before tax and loss making companies will be able to claim a payable credit. The Government will be consulting on the detailed design of the credit shortly and final rates will be decided following consultation.
There will be no further changes to fuel duty. However, a 3.02p per litre fuel duty increase will take effect on August 1 as planned. This move has angered motoring groups, who are already facing high petrol costs. Fair fuel stabiliser will mean that above inflation rises in fuel duty will only return if the price of oil falls below £45 a barrel. Vehicle excise duty (VED) goes up in line with inflation from 1 April 2012 except for heavy goods vehicles, which will be frozen.
For more information download the Joint Taxation Committee Briefing on the 2012 Budget.
The Chancellor used his Budget announcement to confirm that the final National Planning Policy Framework will be published next Tuesday (27th March). The controversial reforms will include the "presumption in favour of sustainable development” in a bid to streamline the planning system. This represents the biggest change to the planning system since it was set up and removes presumes the default answer to development proposals will be “yes”. The Government's proposed changes to planning rules will take effect immediately, overriding local plans unless they include pro-growth policies.
Friends of the Earth have warned that the planning reform could pave the way for a development free-for-all.
Enterprise zones and small business support
Enterprise finance guarantee, in which the government guarantees bank loans to small business, is to be expanded. Also an extra £270m for the Growing Places fund aims to boost local economic growth and job creation. There will also be new enterprise areas in Dundee, Irvine and Nigg in Scotland and Deeside in Wales.
Approved alterations to Listed Buildings
Zero-rating for approved alterations to listed buildings is to be removed with effect from 1 October 2012. All building materials and construction services for an approved alteration to a protected building will incur standard rate VAT, and only buildings reconstructed from a shell will continue to benefit from the zero rate.
In addition, the ‘60% test’ for the first sale or long lease of a substantially reconstructed listed building is to be removed, so that zero-rating will apply only if the reconstructed building incorporates no more of the original building than the external walls, together with other external features of architectural or historic interest.
Transitional arrangements will provide for the retention of zero-rating where a contract for reconstruction was entered into prior to 21 March 2012, and at least 10% of the work (by cost) was completed before that date. Anti-forestalling measures will be introduced in the Finance Bill 2012.
The Listed Places of Worship Scheme will be expanded to reduce the impact of the change for churches.
GREEN INITIATIVES UPDATE
Green Investment Bank
The Green Investment Bank, which is designed to accelerate private sector investment in the UK’s transition to a green economy, will open for business in April 2012 and make its first set of investments.
Feed-in Tariffs and Renewable Heat Incentive
As already announced, from April 2012, plant and machinery covered by the Feed-in Tariffs and the Renewable Heat Incentive will not be entitled to enhanced capital allowances. Expenditure on solar panels will be designated as special rate expenditure for capital allowances purposes from April 2012.
CRC Energy Efficiency Scheme
The Chancellor announced that the government will consult on simplifying the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme. The aim is to reduce administrative burdens on business. Should very significant administrative savings not be deliverable, the government says it will bring forward proposals this autumn to replace revenues from the scheme with an alternative environmental tax and promises to engage with business before identifying potential options.
The announcement was welcomed by the British Property Federation (BPF), who urged government to rationalise the fiscal element of the CRC Energy Efficiency Scheme and the Climate Change Levy into a simple retrospective tax on the carbon associated with building energy consumption. The price of carbon under this tax could be set in consultation with the Committee on Climate Change.
CHP exemption from Climate Change Levy scrapped
George Osborne confirmed he would scrap the exemption that combined heat and power (CHP) operators have from the Climate Change Levy(CCL) – the tax on energy delivered to non-domestic users.
The CCL CHP indirect supplies exemption will end from 1 April 2013. Legislation in Finance Bill 2012 will allow an electricity utility with a credit balance at 31 March 2013 to continue to make CCL exempt supplies until 31 March 2018 in order to use up that balance.
With effect from 1 April 2013, regulators (the Office of Gas and Electricity Markets Authority, and the Northern Ireland Authority for Utility Regulation) will no longer issue levy exemption certificates (LECs) in respect of electricity generated in a CHP station. This follows the introduction of the carbon price floor from 1 April 2013.
The move could discourage power generation from CHP plants. The Combined Heat and Power Association called the move a setback for growth and a setback for the government's green ambitions.
It was also announced that a new gas generation strategy will be set out in the autumn to secure investment, as the government expects it to be the largest single source of electricity in the near future.