Our tax advisors, RSM, give us a round down of the key points for housing associations from the most recent Spring Budget and advise what could happen in upcoming updates.
Although the Spring Budget on 3 March will have limited immediate impact on housing associations, there are nevertheless a number of announcements that will be of interest to finance teams.
Demand for housing properties will no doubt be supported by a new mortgage guarantee scheme and the deferred withdrawal of the temporarily increased Stamp Duty Land Tax (SDLT) nil-rate band.The mortgage guarantee scheme is designed to encourage more lenders to offer 91-95% mortgage products. Based on the version of the scheme that was launched in 2013, it will give lenders the option to purchase a guarantee under which the government will compensate the lender for a proportion of the losses suffered in the event of repossession. In effect, the guarantee means that the first 20% of any loss is shared with the homeowner and the government.
In an effort to reinvigorate the housing market following the first national lockdown between March and May 2020, the Chancellor announced a temporary increase to the amount a purchaser could pay for residential property before SDLT was due, raising the SDLT nil rate band from £125,000 to £500,000. This temporary increase was due to end on 31 March, but has been extended to 30 June. From 1 July until 30 September, the nil rate band will reduce to £250,000, before returning to the standard amount of £125,000 from 1 October.
Given that this relaxation is worth up to £15,000 to purchasers of residential property in England (£2,500 between 1 July until 30 September), there is likely to be a great deal of activity in the coming months as lockdown restrictions begin to ease and the housing market reopens for business.
In terms of tax increases, the Chancellor has said that, although personal tax rates and allowances will increase for the 2021/22 tax year, many will then remain unchanged until 5 April 2026. This will mean that, in real terms, most people will see an increase in the tax they have to pay.
There was no suggestion that the secondary threshold, the threshold above which employers’ national insurance contributions (NIC) becomes payable at 13.8%, will be held at its 2021/22 level until 5 April 2026. Equally, there was nothing that ruled out the possibility of housing associations seeing increases, in real terms, in employer NIC due to a lack of inflationary increases in the NIC threshold.
The Coronavirus Job Support Scheme has been extended to September. However, there is no further delay to the off-payroll working (or IR35) rules, as these will come into effect from 6 April 2021 as planned.
The government is further enhancing its support for apprenticeships. Housing associations that hire a new apprentice between 1 April 2021 and 30 September 2021 will now receive £3,000 per new hire. This compares favourably with £1,500 per new apprentice hire, or £2,000 for those aged 24 and under, under the existing scheme.
A new penalty regime is to be introduced for VAT periods starting on or after 1 April 2022. Taxpayers will no longer receive an automatic financial penalty if they fail to meet a submission deadline. Instead, they will receive a ‘point’ every time a deadline is missed, and will have to incur a certain number of points before a financial penalty of £200 is levied. Accrued points will expire after two years, unless the taxpayer is at the penalty points limit in which case a period of compliance will be required before the points tally is reset to zero.
At the same time, a new system of penalties is being introduced for the late payment of VAT. Taxpayers will not incur a penalty if the VAT is paid within 15 days of the due date. If the VAT remains unpaid after day 15, the taxpayer will incur a penalty of 2% of the outstanding amount, increasing to 4% of any VAT outstanding after day 30. If the VAT remains unpaid on day 31, the taxpayer will begin to incur an additional penalty on the VAT that remains outstanding, which will accrue on a daily basis, at a rate of 4% per annum.
The government will be making further documents and consultations - which would traditionally be published at a Budget - available on 23 March (branded ‘Tax Day’). The intention is to ensure that stakeholders have a better opportunity to feed into consultations and policy discussions. Although none of these announcements will require legislation now or have an immediate impact on the government’s finances – several will form an important part of the government’s 10-year tax strategy.
In many ways, the Spring Budget 2021 was the end of ‘Part One’. ‘Part Two’ on 23 March could well have longer-term implications for the tax environment in which housing associations operate.
Keep an eye on our website for further guidance following these announcements. If you have any questions about the Spring Budget and what it means for your housing association then get in touch with us today.