The 2016 Budget has offered mixed news for commercial property owners.
The positives are lower capital gains tax to a 20% rate which may encourage some owners to sell. However the increase of SDLT to 5% is a negative and significantly reduces the attraction of buying property assets. The trend to lower corporation tax rates of 17% by 2020 potentially makes capital allowances less valuable for corporates.
However the consultation on potential restriction of interest relief to 30% of EBITDA by April 2017 will make capital allowances substantially more valuable. There are many property owners who are able to shelter all property income with bank interest and as a result do not bother to claim allowances. Going forwards a significantly reduced interest shelter will make claiming allowances fundamentally important where EBITDA exceeds 2m. Also the potential restrictions on losses to be carried forwards (to 50% above £5m) will also make claiming historic and current year allowances much more important.
While this is not a great budget for commercial property owners it does make claiming capital allowances now and going forwards much more valuable.