REITs

Phil Nicklin, Real Estate Tax Partner at Deloitte, comments on the impact of today’s Budget on the Real Estate Industry:

“Numerous changes were unlikely, given that this was an Emergency Budget in an election year. The new Government’s confirmation that they will carry through the previously proposed changes to the REIT regime regarding stock dividends is most welcome.

“The industry had been lobbying hard for the previous Government to make changes to the REIT regime, so that stock dividends can count towards a REIT’s 90% distribution requirement. Currently only cash dividends count.

“Stock dividends (where a shareholder opts to take shares in lieu of a cash dividend) have proved very popular recently and will help REITs to conserve cash. This is particularly important in an environment where new debt is difficult and expensive to come by.

“There was always a chance that the new Government wouldn’t have carried through the changes to REITs proposed by the previous Government. It’s very pleasing that they have.

“This change is a win, win, win situation. REITs conserve cash and shareholders can choose to receive shares, and the Government still gets its tax.”

Buy-to-let investors

Nicklin continues: “The widely expected increase in the capital gains tax rate for higher rate taxpayers to 28% is unwelcome news for buy-to-let investors, but things could have been a lot worse.”

Capital Spending

Philip McArthur, Director in Strategic Consultancy at Drivers Jonas Deloitte, said:

“Not much was announced that would appear to directly affect the mainstream property market but the statement that there would not be any reduction in capital spending totals in the Budget was unexpected.  It is clear that those public projects seeking funding will be subjected to closer scrutiny with any available funding being directed to those projects delivering a significant economic return to the country. This appears to be consistent with the earlier Government indications that it would seek to continue investing in regeneration projects.”

Rating Relief

Robert Murdoch, associate partner and head of Rating at Drivers Jonas Deloitte, comments on the Government’s legislation to freeze payments of business rates bills until April 2011.*

“This is welcome news for many businesses, including ports, that had received unwelcome backdated rate bills going back to 2005. Unfortunately for some this relief has come to late. The problem arose because whilst the Valuation Office Agency was entitled to backdate the assessments to 2005 and they had known about the need to deal with this issue prior to 2005, they did nothing about it until 2009.  They had no regard to the financial consequences of their actions. It is time that the Valuation Office Agency are charged with not only valuing properties for business rates but also to have regard to the financial consequences of their actions.”

Stamp Duty

Edwin Bray, Director and Head of Professional Services at Drivers Jonas Deloitte Birmingham, comments on stamp duty and what the budget means for the Midlands:

“The Chancellor signalled his intention to carry out a review of SDLT - the Government will examine whether further changes to the rules on stamp duty land tax on high value property transactions are needed to prevent avoidance. The Government is also likely to review the effectiveness of the stamp duty land tax relief (SDLT) for first time buyers. This scheme has helped to stimulate the residential market from the bottom up and, given the continuing difficulties in the residential sector, we believe it would be premature to scrap the scheme until the market returns to steady growth.”

“In terms of what this Budget means for the Midlands, it was encouraging and reassuring to hear that funding for the New Street Station development is secure.  The government clearly recognises what a vital project this is in terms of both regional growth and the country’s wider rail infrastructure.  The announcement that the Regional Growth Fund will be concentrated on transport schemes in the West Midlands is further good news and we look forward to hearing the details.”