Construction and Budget 2014

Construction and Budget 2014

Most of the Budget 2014 tax and spending changes are contained in the Treasury Red Book. Details important to specific industries like construction are rarely reported in the news media. KCS Construction Advice has extracted details from the Budget 2014 Treasury Red Book which are likely to affect the Construction Industry. In general the prospects are good. Budget 2014 is forecasting faster economic growth. By May 2014 the economy will finally recover all the output it lost in the recession. So we’ll be back to where we were in 2008. This might not sound much to write home about but given the state of the public finances and the near total banking collapse which caused all the trouble it could have been a great deal worse. And when the existing data is revised upwards, we think that the figures will show that the recovery milestone, may already have been passed well before May. So from the date of Budget 2014 on, national output will exceed the pre recession levels and the UK will be growing faster than any major industrialised economy, much faster than the rest of Europe. But there might be a slight downside for the construction industry and homebuyers in the years to come. By Spring of 2015 interest rates will have to start to rise towards more normal levels. We think the first quarter % rise will likely be immediately after the May 2015 General Election.

Budget 2014 Benefits for Construction

Budget 2014 itself has doubled to £500,000 the Business Investment Tax Allowance which companies can set off against their immediate tax liabilities. This is twenty times the amount allowed prior to 2012. Budget 2014 also creates a £500 Million ‘Builders Finance Fund’ to provide loans to small and medium sized housing developers and creates an Urban Development Corporation for a new Garden City in Ebbsfleet near Gravesend with the intention of building 15,000 new homes. Budget 2014 further provides £140 Million of new funding to repair flood defences that have suffered damage in the recent severe flooding and gives £200 Million to establish a ‘Potholes Challenge Fund’. Not before time you might say. If like the writer of this article your car not so long ago hit a pot hole on a motorway leaving it with a flat tyre and damaged wheel rim. Local authorities will have to bid for a share of the fund to fill in the potholes many of which have arisen from extreme weather conditions in recent years. The Budget 2014 Red Book says that since 2012, 1,900 infrastructure projects have been completed by the government including over 550 road and rail projects. The government’s ‘Help to Buy’ equity loan has supported over 25,000 reservations for new build homes. Over 6,000 households have put in offers for homes supported by the Mortgage Guarantee Scheme in the first 3 months. Levels of planning approvals are at a 5 year high.

Self employed builders and sub contractors will welcome a simplification of the tax system proposed in Budget 2014. The government’s aim is that the tax system should be simpler to understand, simpler to comply with and cheaper to administer. From 2016 the present cumbersome process of paying a relatively small amount in Class 2 National Insurance Contributions weekly will be replaced by a system of adding the amount due into the annual tax assessment at the same time as the Class 4 National Insurance Contribution is assessed. Why it taken until Budget 2014 to bring about this obviously sensible change is a mystery. Class 2 is something that some newly self employed people don’t even know exists at all and end up forgetting to pay. There’s no real reason why it shouldn’t be billed separately from Class 4 and be the subject of a separate collection system.

Budget 2014 Infrastructure

Large parts of the UK have suffered severe flooding. Budget 2014 has promised to provide £140 Million of new funding to restore and repair damage to flood defences. This money is in addition to the £2.4 Billion already provided for in flood defence investment to take effect from 2015. And the government has finally got round to planning a proper strategy for flood defence  planning which it will be announcing later this year. Budget 2014 hints at a chance that the HS2 project will be accelerated and completion brought forward six years and that the re-development of Euston Station will be much more extensive than originally proposed. The new man in charge of HS2 is the man who managed the 2012 Olympics Construction. So there’s actually a chance that HS2 will be finished on time and within budget although even with the accelerated time table a good number of us may still not be alive to see catch one of the trains. Budget 2014 proposes £270 Million to spend on the Mersey Gateway Bridge and has found £20 Million to spend on Cathedrals in recognition of their historical significance and role in the forthcoming remembrance of the First World War. Planning approvals for housing starts are at 5 year highs and house building is expanding at its fastest rate for 10 years. These improvements are partly due to the Help to Buy Scheme which is expected to assist more than 74,000 households to buy a newly built home by March 2016. This seems to have been an unusually successful scheme because it’s focussed entirely on newly built homes, so it encourages house building rather than inflating the price of existing ones. Budget 2014 has also extended the equity loan scheme to permit a further 120,000 purchasers to be helped between 2016 and 2020. The government is providing a £500 Million ‘Builders Finance Fund’ to allow developers to unlock 15,000 housing units otherwise held up by finance difficulties. Of real interest to smaller builders however will be a possible new ‘Right to Build’ Scheme flagged in Budget 2014, which will allow builders the right to get a plot from the council and have access to a £50 Million fund to help to obtain 10,000 serviced plots. There are suggestions that the Help to Buy Scheme will also be available for use alongside Right to Build projects. A further £150 Million will be available in loans for the regeneration of housing estates. Grahame Park, Blackwell Reach, and Aylesbury Estates in London have already expressed interest. Further proposals are in hand for an extension of the Gospel Oak to Barking Line as far as Barking Riverside. Funding for the Brent Cross Regeneration Scheme will also be considered. Apart from the £200 Million the government is making available for the Ebbsfleet Garden City, it will be consulting with other local authorities who come forward with their own proposals for their own Garden Cities. The government is ready to consider changes to the existing ‘Permitted Development Order’, to allow from more flexibility.

Wheels Finally Turning?Budget 2014 2

A 3% increase in the National Minimum Wage to £6.50 an hour was announced in advance of Budget 2014, with a smaller 2% increase in the youth apprentices’ rate from October 2014. The present system of help with mortgage interest payments which persons receiving state benefit receive is extended until March 31st 2016. Less welcome for aggressive tax planners however will be the announcement in Budget 2014 that the tax regime for people who buy houses in the name of a company to avoid Stamp Duty Land Tax is being tightened. Duty of 15% will be payable from April 2015 for properties worth more than £2 Million. Further changes to lower valued properties will start in 2016. Budget 2014 flags the intention to introduce a Strategic Land Review to release more land for building and the government will be bringing forward new proposals for building ‘Zero Carbon Homes’. The ‘Aggregates Levy’ rate stays at £2 per tonne but the exemptions from the levy presently available will be suspended in April 2014 and will stay suspended until the European Commission has decided whether or not the exemptions are legal. Landfill Tax will increase in 2015 in line with inflation, (probably by about 2%). Vat thresholds rise to £81,000 on April 1st 2014 but new Budget 2014 proposals will eventually have the effect of allowing VAT to be charged on the lower price where a prompt payment discount has been given to the customer conditional upon payment being received on time.

 

Budget 2014 also proposes Business Rate discounts for businesses who have located to Enterprise Zones by March 31st 2018. The government is proposing a City Deal for Glasgow and if the Scottish Government will match its own funding the government will initiate a study for an improvement in the A1 between Newcastle and Edinburgh. The government is also supporting the Northern Ireland Governmental initiative for a pilot Enterprise Zone in Colerain. Budget 2014 goes on to hint at changes to Planning Regulations which will make modifications to car parks and communal facilities easier and the government also wants ‘Change of Use’ planning applications made easier. Alongside these proposals the government says it’s working closely with the Judiciary to make the new Planning Courts coming in from April 2014 to work better and aims to save unnecessary costs of Judicial Review in disputed planning applications.

Budget 2014’s bitter pill.

Buried in the Budget 2014 is a nasty little provision. It simply says ‘The Government will ‘modernise’ and strengthen HMRC’s debt collection powers to recover financial assets from the bank accounts of debtors who owe over £1,000 in tax’. This is a new provision which will alarm anyone with a business and indeed anyone who values civil liberties. Put simply it means that Budget 2014 proposes to give HMRC the power to take money from your bank account if it thinks you owe it tax. If after further enquiries it turns out that you don’t owe anything it will give the money back. Many businesses in the construction industry would be grateful for similar powers to help themselves to the contents of bank accounts when someone owes money. But private individuals have to go to the inconvenience of going to court and sending in the bailiff’s to get what they are owed. HMRC it now appears will be given powers to take money from our bank accounts as and when it likes and will be up to us to prove that we don’t owe it before we can get it back. By then we will have suffered the distress and inconvenience of the ordeal and businesses may have been ruined for lack of liquid cash. So it might be safer to keep our money under the bed, in the garden shed or do what Harry Enfield’s, friend ‘Loadsamoney’ used to do, carry it around in a wheelbarrow.

Safer than a Bank?budget 2014 1

The full details of Budget 2014 are available in the Treasury Red Book on the following link.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/293759/37630_Budget_2014_Web_Accessible.pdf

Check out the Budget 2014 proposals to allow access to your private pension pot. From April 2015 you should, if you want be able to take out all of your pension pot when you reach retirement age and use it to best advantage to fund your retirement, instead of receiving it in dribs and drabs as an income. Build a house with it perhaps. Good news for pensioners, bad news for some insurers. One major stock market company which makes most of its money arranging pensions from assets held in pension funds saw its share price fall from 300p to 120p in less than 48 hours after the Budget 2014 announcement.