21 March 2007

Property Companies appear to be clear losers from this budget in that the depreciation allowance for property will be abolished and there will be a crackdown on the way some classify fixtures and fittings in buildings as ‘equipment’ in order to benefit from generous depreciation allowances. However, the depreciation rate for so-called long life assets is going up from 6% to 10%. But the depreciation rate on short life assets is being halved from 40% to 20%. There will also be yet more tax incentives for research and development, with the tax credit for R&D going up from 150% to 175%.

All in all, I would expect big companies to welcome these measures as an attempt to restore the tax competitiveness of the UK, in the face of a worldwide downward trend for corporate taxes.

It was very disappointing to hear that zero carbon homes up to the value of only £500,000 until 2012 will be exempt from stamp duty. Creating a zero carbon home can often add anything up to 15% to the build costs and a £500,000 threshold prevents many of the volume builders from attracting a premium for properties below this limit. We believe that by setting a low threshold means that only the wealthy can afford to pay for measures to reduce carbon emissions. A zero carbon home is one with ‘zero net emissions of Carbon Dioxide (CO²) from all energy use in the home’. The definition encompasses all energy use in the home... rather than just those energy uses that are currently part of building regulations (space heating, hot water, ventilation and some lighting). It means that over a year there are no net carbon emissions resulting from the operation of the dwelling. This could be achieved either through steps taken at the individual dwelling level or through site wide strategies.

The inheritance tax threshold has taken a reasonable leap from £285,000 to £350,000, but I am certain it will make little difference to many people who have a property that forms part of an estate, with the average price of an Oxfordshire home already being above this threshold. And surprise, surprise - no change in the stamp duty thresholds, in spite of recent house price inflation.

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