As the Chancellor recognised, the housing market is still going strong and with the 8% rise in house price inflation recorded last year, it’s evident that the supply/demand imbalance continues, as does the impact of past inflationary policy. So arguably the estimated £1.6bn cost of the stamp duty holiday is not needed, particularly given it seems to have passed through to house pricing to date. However, no doubt it will be welcomed by the sector.

The announcement about 95% mortgages was a necessary intervention given how much house prices have risen and this isn’t an issue that’s exclusive to the UK. Clearly it is a tricky balance as house prices and deposit requirements are increasing and remain unaffordable for many; interest rates are currently very low, but future rises could impact heavily on affordability. The Government’s mortgage guarantee scheme suggests that house price stability or growth will be a continued focus for future policy – and may need to continue after the proposed December 2022 date.

It’s great to finally have a sovereign wealth fund, with the UK Infrastructure Bank, as currently, international pension funds support much of the country’s real estate and infrastructure sector. So now, perhaps the UK can have a route to drive investment from its own pension schemes. The key will be getting the appropriate definition of infrastructure, including key worker housing - which is still in too short supply, energy efficiency retrofit for existing buildings and new green industry. Freeports could be a strong route to these, and whilst they are complex, they have tax advantages and are potentially game-changing for local economies.


Amongst the raft of measures targeted at keeping the wider economy going, there were three main VAT points which are likely to be of interest to social housing providers.

Extension in the reduced 5% VAT rate: The temporary reduced rate of 5% for supplies of hospitality, hotel and holiday accommodation will be extended to 30 September 2021. From 1 October 2021 until 31 March 2022 such supplies will then be subject to VAT at 12.5%, after which the supplies will go back to the standard rate of 20%. This continuation of the temporary reduction in the standard rate of VAT should be relevant to social housing providers that also provide catering, hostel accommodation and guest rooms in their facilities, all of which would otherwise usually be subject to VAT at the standard rate of 20%.

VAT Deferral New Payment Scheme: As previously announced, the Chancellor confirmed that taxpayers who took advantage of the COVID-19 VAT deferral between 20 March and 30 June 2020 can opt into the VAT Deferral New Payment Scheme and repay this VAT in a maximum of 11 equal instalments starting from March 2021. It was also announced that a new penalty would be introduced of 5% of the amount of deferred VAT that is outstanding if businesses have not paid in full, opted into the New Payment Scheme or made alternative arrangement to pay by 30 June 2021.

Interest and penalty reform: The government will reform the penalty regime for the late submission and late payment of VAT. The new late submission regime will be points-based, and a financial penalty will only be issued when the relevant points threshold is reached. The new late payment regime will introduce penalties proportionate to the amount of tax owed and how late the tax due is. Interest charges and repayment interest will be aligned with other tax regimes. These reforms will come to effect from periods starting on or after 1 April 2022. 

Stamp Duty

Stamp Duty Land Tax (“SDLT”) holiday extended: The current SDLT 'holiday' under which the nil band for residential properties was increased from £125,000 to £500,000 was due to end on 31 March 2021. It will now be extended to 30 June 2021. Thereafter the nil band will reduce to £250,000 until 1 October 2021 when it will return to £125,000. 

This is clearly a welcome stimulus to the residential property market as a whole - the rate of SDLT is reduced for people buying their main home, a buy-to-let or a second home, saving up to £15,000 of SDLT.

New SDLT and Annual Tax on Enveloped Dwellings (“ATED”) reliefs for certain housing cooperatives: Last summer HMRC published draft legislation to relieve qualifying housing cooperatives from the 15% ‘envelope’ rate of SDLT and the charge to the ATED; each typically applying where the dwelling value is £500,000 or above.

Qualifying housing cooperatives are essentially ones that are neither publicly funded nor social housing cooperatives and do not have transferrable share capital.

The ATED relief will take effect retrospectively from 1 April 2020 (so refunds may be claimed by qualifying housing cooperatives). The SDLT relief will come into effect from Budget Day i.e. 3rd March 2021.

Land Transaction Tax (“LTT”) for property in Wales: The Welsh Revenue Authority also announced on 3rd March 2021 that the temporary LTT ‘holiday’ which increased the nil rate band from £180,000 to £250,000 which was also due to end on 31st March 2021 would also be extended to 30th June 2021. There will be no tapering after that so the nil rate band will revert to £180,000 for transactions that complete on or after 1st July 2021.

Corporation Tax

Many Housing Associations benefit from the availability of charitable exemptions. Nevertheless, the following corporation tax announcements may still be of interest in the sector, particularly for Housing Associations with non-charitable subsidiaries.

  • Corporation tax rate change - Corporation Tax remains at 19% until 31 March 2023, then it will increase to 25% from 1 April 2023 accompanied with a small profits rate of 19% for profits up to £50,000 tapering to 25% for profits of £250,000 or more.
  • Enhanced capital allowances -Temporary 130% and 50% first year allowances for new investments in plant and machinery and special rate assets made between 1 April 2021 and 31 March 2023. The annual investment allowance of £1 million will also remain until 31 December 2021.
  • Trading losses - Temporary extension to the trade loss carry back period to three years for losses arising in 2020/21 and 2021/22 based on a £2 million allowance per year (adjusted for groups).

Employment Tax

Extension of the Coronavirus Job Retention Scheme (“CJRS”): As was widely trailed, the CJRS will be extended to the end of September, with a phased reduction in financial support from the start of July. The continued use of the scheme by the sector as it continues to return to ‘business as usual’ will mean this is a welcome extension to help keep costs under control.

However, the Government also announced they will invest over £100 million in a special taskforce of 1,265 HMRC staff to target fraud within COVID-19 support packages, including the CJRS. We are aware of reviews already underway on claims in the sector therefore this will make it more important than ever that employers ensure their claims are robust.

From an employer’s perspective, the other main announcements concerned:

  • Benefits in kind and expenses: Temporary income tax and NIC easements for certain COVID-19 related benefits in kind and employer reimbursed expenses extended to 2021/22.
  • Off-payroll working: Implementation of the reforms from 6 April 2021 was confirmed, with a change to better target the definition of a worker’s ‘intermediary’ to prevent abuse, and other minor changes; and
  • Income tax and NIC: Previously announced increases to bands and thresholds from 6 April 2021 were confirmed, but the personal allowance and higher rate threshold will then remain frozen until April 2026.

Finally, the other measure expected in Finance Bill 2021 that will impact Housing concerns:

  • The Construction Industry Scheme (CIS): To let HMRC amend unsupported CIS deductions against PAYE, amend the ‘deemed contractor’ registration rules, restrict the ‘materials deduction’ in certain circumstances, and expand the scope of the false registration penalty. With HMRC recently writing to all Housing Associations in the UK in respect of their CIS compliance, an awareness of these changes will be essential to ensure you remain complaint.

How can I find out more?

Further details and commentary will appear on our Employers’ Club website.  You can subscribe to People & HR Insights via our preference centre to keep up to date.

If you would like to discuss any of these points please do not hesitate to contact your usual KPMG contact, or one of the following:

Corporate Tax: Kathryn Mallett (0129 365 2743) or Thomas Dye (0292 046 8040)

Stamp Duty, Land Tax and property tax: Neil Whitworth (0161 2464276)

VAT: Dan Smith (0207 311 4379) or Gareth Blower (0129 365 2768)

Employment tax: Paul Moreels  (0191 401 3703)