Given the objective of the Spring Budget to retain financial markets’ confidence whilst meeting the Prime Minister’s own priorities for the economy – halving inflation, growing the economy and reducing government debt – it is unsurprising that statements on housing were light and not an area of focus.
Beyond the announcement confirming that interest expense cannot be used as tax relief in a charity, the Budget brings little change for housing associations.
However they might be interested in the announcement that the government will bring forward Public Works Loan Board rule changes to support local authorities borrowing for Housing Revenue Accounts and the delivery of social housing.
We have set out our commentary on sector-specific tax measures below. For our broader Budget summary, follow this link: Spring Budget 2023: Budget on a page - KPMG United Kingdom.
Denial of tax relief on interest costs in a charity
Legislation will be introduced in the Spring Finance Bill 2023 to make amendments to clarify that companies which are charities cannot benefit from tax relief for financing costs incurred in respect of their tax-exempt activities. As a result, there will be no need for these amounts to be included in CIR calculations (section 457 CTA 2009, section 382 TIOPA)
This will be relevant to many housing associations who have been taking tax relief for a charity’s interest costs by group relief or in future periods, as well as those who prepare Corporate Interest Restriction returns.
We expect this change will be brought in with effect for accounting periods beginning from 1 April 2023. However we await the draft legislation to confirm this.
Corporation tax rate change
There are no changes to the proposed main rate of corporation tax of 25 percent with effect from 1 April 2023 and the small profits rate of 19 percent. Housing associations with non-charitable trading subsidiaries should take note of the change in corporation tax rate.
The Spring Budget included an announcement of a call for evidence in relation to energy saving materials. A zero-rate for certain energy saving materials for a five year period to 31 March 2027 was previously announced. The Government’s objectives in relation to the zero-rate were improving energy efficiency and reducing carbon emissions, cost effectiveness, and alignment with VAT principles.
The call for evidence follows this and seeks views on two potential areas of reform:
- The inclusion of additional technologies within the zero-rating. The call for evidence specifically mentions battery storage but asks for any other technologies which meet the Government’s three objectives but are not currently included; and
- The extension of the zero-rating to buildings solely for a relevant charitable purpose.
This call for evidence can be found here: VAT energy saving materials relief – improving energy efficiency and reducing carbon emissions - GOV.UK (www.gov.uk)
There were no specific Employment announcements that affect the sector.
Stamp Duty Land Tax (“SDLT”)
Registered providers of social housing are exempt from SDLT on a purchase of land in England and Northern Ireland if that purchase is funded with the assistance of specific qualifying public subsidies. With effect from 15 March 2023 funding allocated to local Authorities under section 31 of the Local Government Act 2003 to help secure housing for people fleeing conflict will qualify and hence purchases from this date subsidised by this funding will be exempt from SDLT.