Responses to the March Budget
In this week's Budget (on 3 March), Chancellor Rishi Sunak announced ongoing support packages for businesses but with tax increases to come:
- Bounceback and CBILS loans will be replaced by a new Recovery Loan Scheme from 6 April. Businesses of any size can apply for a loan (80% of which is guaranteded by the government) of between £25,000 and £10million until the end of 2021
- The Self-Employment Income Support Scheme is extended with a grant available from May and now also available for people who became self-employed in 2019 ansd 2020. It pays 80% of average trading profits
- The furlough scheme (Coronavirus Job Retention Scheme) is extended to the end September to cover 80% of employee wages
- A 'superdeduction' allowing 130% first year deducation for invesing in qualifying plant and machinery and 50% for qualifying special rate assets
- Doubling of training support for companies to £3,000 per trainee employed and now available for all ages of employees
- The VAT deferral new payment scheme helps businesses with deferred VAT to pay what they owe in smaller, monthly instalments from March, interest free
- To help otherwise-viable UK businesses which have been pushed into a loss-making position, the trading loss carry-back rule is extended from the existing one year to three years
- Corporation tax increases from 19% to 25% from 2023, although there will be relief for companies with profits of less than £250,000pa and it remains at 19% for companies with profits of less than £50,000pa
- Diverted Profits Tax rate rises to 31% from April 2023 so it remains a deterrent against diverting profits out of the UK.
The Construction Leadership Council (CLC), of which Stone Federation is a member, has welcomed the response from the Chancellor to some of its key recommendations, including:
- creation of a National Infrastructure Bank to back projects including regeneration of communities
- the extension and growth of incentives for apprenticeships, with support for traineeships
- the extension of the stamp duty holiday on housing.
Coupled with previously announced increases in support for Building Safety, this, says CLC, demonstrates that the Government is listening to industry and targeting support that delivers better outcomes.
The CLC also welcomes the extension to the furlough scheme, super-deductions for investment, and the creation of eight new freeports.
The Mineral Products Association (MPA), which includes a dimensional stone group of building stone mine and quarry companies, has welcomes the Aggregates Levy freeze announced in the Budget but is disappointed that it will be increased by indexation in the future. It was also concerned about promised tax hikes announced in the budget that will come into effect over time.
The confirmation of the removal of red diesel (introduced for farmers) from extraction and almost all other industrial sectors has disappointed the MPA, which says it will simply raise the cost of extracted minerals and the construction projects they go into. MPA calls it a £100million 'tax raid' on the industry.
Clive Docwra, managing director of property & construction consultancy McBains, said: “The ‘super deduction’ in tax may encourage construction firms to invest, while the reintroduction of 95% mortgages and extending their availability beyond first time buyers could trigger a revival of the housebuilding sector. But we’re disappointed that it appears green retrofit schemes, such as the Green Homes Grant, were not renewed, as such programmes not only help contribute to carbon net-zero targets, but provide a lifeline to many construction firms in terms of maintenance contracts. On a macro-level, we’d have also liked to have seen a bigger commitment to wider green initiatives to help encourage the industry to move towards net-zero.
“And while the Chancellor may have introduced a fast-track visa scheme for high-skilled workers in the tech sector, we’d have welcomed similar applying to the construction industry, because a combination of Brexit and Covid has led to an exodus of high-skilled construction workers from the EU and elsewhere. The doubling of payments to employers for taking on trainees may encourage more firms to take on replacements, however.”
Prof Les Mayhew, Global Head of Research at the International Longevity Centre UK (ILC), commented: “We welcome the extension to Stamp Duty relief announced in the budget today, which the ILC alongside 10 other organisations, called for in a joint letter sent by the Retirement Housing Group. Although there was expected to be downward pressure on house sales due to Covid-19 in 2020–21, house sales have in fact held up well thanks to the Stamp Duty holiday. My wish would be for Stamp Duty to be abolished altogether because it tends to jam up the market as we have seen in recent years."
He said the government 95% mortgage guarantee is not welcomed on its own because its main effect is likely simply to be simply to increase house prices further without increasing supply, especially as data published this week by the Office for National Statistics shows the number of UK households continues to grow apace and now stands at nearly 28million.
David Hannah, Principal Consultant of Cornerstone Tax, discusses the stamp duty holiday extension:
"We welcome the news that the feared ‘cliff edge’ at the end of this month has been avoided, with nearly 200,000 transactions potentially saved, we are also interested to note the ‘tapering’ effect which we and other commentators had called for, with the raising of the Nil Rate band to £250,000 from the end of June until the end of September. While there is still a danger of a mini cliff edge at the end of September, the impact will be far smaller than it could have been.
That said, now more than ever, it is perhaps time that the Chancellor and his government really grasp the nettle of SDLT reform and get it done properly – a permanent higher threshold for it to start, fewer complexities in the application and fewer random additions to the duty which serve only to muddle the market still further.
It is great to see the introduction of a Guarantee scheme and hope that it heralds a new way of thinking about the property market by the government. While measures like the SDLT ‘holiday’ introduced last year certainly can provide short-term boosts in property market activity, it is evident to us and many experts in the property industry that some root and branch reform and deeper measures are required to stimulate sustained and sustainable growth."
Ben Dyer, CEO of Powered Now, comments: "The extension to the stamp duty holiday is hugely welcome. While many will be celebrating the purely economic relief that comes with the extension, there's simply more that this will achieve. This gold rush we have seen thanks to the stamp duty holiday would've meant that there were thousands of transactions eagerly waiting to cross the line before the 31 March deadline. Indeed, recent research from the Guild of Property Professionals has shown that almost a third of buyers would pull out of their transaction if they missed the deadline. Now however, those who also needed to have their documentation in place have been given a lifeline to ensure their transactions get over the line."
Tom Brown, Managing Director of Real Estate at Ingenious, said: “The Chancellor’s decision to extend the Stamp Duty Land Tax (SDLT) holiday and provide a Government-backed guarantee to mortgages with deposits of just 5% reflect the importance of maintaining optimism in the UK housing market. This level of support shows that the Government continues to view the housing market as key to the UK economy at a time when the latest Nationwide House Price report confirmed that demand from buyers is being sustained. The support provided by the SDLT relief extension, saving up to £15,000 on property purchases of £600,000, is positive news for our strategy as an alternative lender focused on the affordable end of the market."
Michael Voges, Executive Director of ARCO, was less enthusiastic. "You can’t help someone buy a house when that house doesn’t exist. Stoking demand through mortgage guarantees and subsidies will not solve our housing crisis and is the equivalent of shovelling yet more cash into the furnace of rising property prices... Making housing work for different generations is not a zero sum game and we will all have a better place to live if we focus on supply as well as demand.”
Adrian Attwood, Executive Director of stone and conservation company DBR, said: “I was buoyed by the Chancellor’s realistic but optimistic budget. While there are definitely some challenges from the post-Covid and post-Brexit impact on UK business, it was encouraging to hear Mr Sunak make a commitment to upskilling our young talent. The traineeship boost is a great start and should be welcomed. The challenge we now face as business and industry is to tempt school leavers into skilled trade and highlight the attractive career paths it offers. We need to work closely with policy makers and educators to achieve this scenario, and this budget lays the foundations for doing so.”
Ben Hancock, Managing Director of Oscar Acoustics, saisd: “As a company that invests heavily in the training and upskilling of its workforce, the Government’s ‘Help to Grow’ initiative is a welcome response to the all-so-common skills shortage prevalent in the industry. We know from experience that there’s a healthy appetite among employees for further training. This latest initiative will help provide the gateway they need to reach the next level in their career. This isn’t just important for the individuals who work within SMEs, but also marks a wider commitment to the future prosperity of UK business and industry, of which construction will be one of many beneficiaries.”
Jon Hales, partner and head of Womble Bond Dickinson's Southampton office, commented: "The economic potential of a Freeport in the region cannot be underestimated – it is huge. A Freeport could generate billions of pounds a year and create tens of thousands of jobs nationally and in the region. It will play an important role in strengthening the UK's trading position; it will drive new clean growth opportunities in manufacturing, trade and inward investment; and it will support the regeneration of the area."