It has been a busy Budget for the real estate sector today, particularly for the residential sector.  The big announcement was the proposal to abolish SDLT’s multiple dwellings relief (“MDR”).  This came as a surprise and for those seeking to rely on the relief for a completion on or after 1 June 2024, they may have been racing to exchange today to lock in MDR on the acquisition.  However, there was some good news for those trying to access the housing market.  The government is proposing to withdraw the furnished holiday letting regime and reduce the higher rate of CGT for those who pay CGT on selling residential properties as these are intended to improve access to housing. But elsewhere reform for SDLT was relatively light.  The government did not respond to lobbying in a few targeted areas. A downsizer’s relief and keeping the current lower thresholds beyond March 2025 were not mentioned.  In further good news the government gave the green light to a new non-authorised fund vehicle, to be called the reserved investor fund or “RIF”.

Budgets are normally stories of two halves.  The first half contains the headline-grabbing tax policy reforms that can be encapsulated in a snappy soundbite in the Budget speech, such as “Chancellor scraps the non-dom regime”.  The second half typically contains more detailed reform packages, which may involve a significant overhaul of a regime past its sell by date, a complex new initiative or a tightening of a measure that doesn’t work as well as it could.  The latter could be viewed as the “business as usual” reform of the tax system, including to make it simpler and to make the UK more competitive. If the Autumn Statement is anything to go by, and particularly bearing in mind the timing of the next General Election, we can expect the Budget on 6 March to be disproportionately focused towards the first half in the hope that carefully considered announcements will shift the dial on voting sentiment.  We expect the Budget to get very political and wonder whether 6 March may see further missed opportunities to reform the tax system.

The Government has announced a further series of proposed changes to the UK REIT rules as part of the wider review of the UK funds regime and published draft legislation. This third set of changes are earmarked for Finance Act 2024 and keep to the program of reform to modernise the REIT regime and generally to make it more accessible.

Underneath the headline points, the Budget contained a number of measures designed to fulfil the Chancellor’s objective of encouraging growth and investment.  There was broadly good news for those investing in UK real estate.  We look at some of the key announcements relevant to real estate below.

Some of the most commonly used trust structures in UK real estate ownership are Jersey Property Unit Trusts (JPUTs).  It has become clear recently, following confirmation from HMRC, and HMRC now changing its published guidance, that the trust registration service (the TRS) can apply to JPUTs.  If it applies, trustees will need to register the trust with HMRC under the TRS and keep records. Recent HMRC guidance had said neither authorised nor unauthorised unit trusts were required to be registered.  Now HMRC’s guidance says unauthorised unit trusts may need to register if they meet the general registration requirements (see below for the primary triggers for registration).    It is not just those who are managing existing JPUT structures or setting up new JPUT structures who need to consider the TRS.  Buyers of UK real estate where they are buying into the structure may also consider it, as will lenders to such structures. First, how did we get here and how do the TRS rules operate?

The changes to the Luxembourg-UK treaty will not be effective until 2024 at the earliest because Luxembourg did not ratify the treaty changes in 2022.  The delay was expected, as trailed in our earlier blog, where we explore the impact on the UK real estate sector.