UK Autumn Statement 2023 - Real Estate

Key points

On 22 November 2023, the UK Chancellor of the Exchequer delivered his Autumn Statement which focused on incentivising business investment, reducing debt and backing British business.

Little was announced in relation to UK real estate taxes. However, the following should be noted:

Capital Allowances – “full expensing” made permanent

One of the key business incentives in the UK’s Spring Statement 2023 was the replacement of the “super-deduction” with “full expensing”, allowing companies to write off the full cost of qualifying plant and machinery expenditure on assets such as machines, computers, tools, vehicles (excluding cars) and office, construction and warehouse equipment in the year of investment.

As was indicated in the Spring Statement, that change (which was originally intended to apply to expenses incurred within a three-year period commencing 1 April 2023) will now become permanent, so that investments made by companies in such qualifying plant and machinery (which includes items which qualify as “fixtures” within buildings) will continue to qualify for a 100% first-year allowance for main rate assets and a 50% first year allowance for special rate (including long life) assets.

In addition, the government has launched a technical consultation on wider changes to simplify the UK’s capital allowances regime, with draft legislation expected in Summer 2024.

Construction Industry Scheme (CIS) Reform

The Chancellor announced that regulations will be introduced to remove the majority of payments from landlords to tenants from the scope of the CIS. This will be a welcome development for landlords that inadvertently trip into the scope of the CIS when making “works contributions” to tenants.

The government has also confirmed that it will introduce reforms geared at deterring tax fraud in the construction industry. Such reforms include adding compliance with VAT obligations to the CIS gross payment status compliance test so that subcontractors may have their gross payment status immediately cancelled if HMRC have reasonable grounds to believe that it has fraudulently provided an incorrect VAT return or information.

Real Estate Investment Trusts (REITs)

In July 2023 draft legislation was published which included a number of proposed amendments to the UK’s REIT regime. These changes mostly clarify the application of the rules and continue to make changes to make the regime more attractive to institutional investors. The government has confirmed that changes will take effect from Royal Assent of the Autumn Finance Bill 2023, and in some cases will apply to accounting periods ending on or after 1 April 2023, or will be deemed to have always had effect.

Miscellaneous changes

Five new investment zones were announced, with tax reliefs across the zones extended, the business rates relief scheme for the retail, hospitality and leisure sectors has been extended to 2024/25, and ATED charges will rise by 6.7% from 1 April 2024.

Should you have any queries on the Autumn Statement, please reach out to your usual UK tax contact or one of the following:

Mark Burgess, Partner

Matt Davies, Partner

Richard Harbot, Partner

Gemma Grunewald, Senior Associate

Katie Raine, Associate

Richard Woolich, Partner