Budget 2007 – Construction Industry

Green Issues

Landfill Tax (LFT)

As expected the Chancellor raised the standard rate of Landfill Tax to £24 per tonne with effect from 1 April 2007. The shock move was that rates will continue to rise by £8 per year (rather than the expected £3) to a likely ceiling of £56 per tonne by 2011 – an increase of 166%. The lower rate for inert material will also increase from £2 per tonne to £2.50 per tonne with effect from 1 April 2007.

Although a very unwelcome cost to the industry this measure should certainly act as an incentive to reduce waste going to landfill and help meet the recycling targets the Government has set. The exemptions for the reclamation of land which remove the standard rate charge should be carefully considered when undertaking such land remediation projects. The exemption and the 150% corporation tax allowance for reclaiming contaminated land will certainly help the viability of projects.

Brownfield Land Development

The Chancellor announced a very welcome consultation process to improve the effectiveness of Land Remediation Relief (enhanced deduction at 150% of qualifying expenditure). This consultation considers widening the scope of the relief to cover such things as demolition of existing buildings and improving or creating access and services. Of even greater value would be the possible extension of relief for the removal of Japanese Knotweed.

The document also seeks views on the ending of the Landfill Tax exemption for waste from contaminated sites. This is in light of technological advances, enabling waste to be cleaned up before being deposited in a landfill site.

Aggregates Levy (AGL)

Agrregates Levy will increase from £1.60 per tonne to £1.95 per tonne from 1 April 2008. Again this means a hike in costs for the industry but should encourage recycling of aggregates, and discourage quarrying. An exemption is to be introduced to ease tax costs to those constructing new railway infrastructure.

Stamp Duty Land Tax (SDLT)

At first glance the announcement that there will be no Stamp Duty Land Tax liability for all new zero carbon homes with a price of up to £500,000, from 1 October 2007, and a reduction for prices in excess of this, is a positive step. However the devil tends to be in the detail and we still await details of the certification process that will mean a property will be eligible for this treatment.

Road Fuel Duty

The Chancellor announced increases on road fuel duties which will come into force from 1 October 2007, with further increases effective from 1 April 2008 and 2009. The diesel rates are increased by 2 pence per litre.

VAT

The Chancellor announced changes to reduce the VAT rate to 5% on certain housing alterations for the elderly from 1 July 2007. He would also like to reduce the VAT rate to 5% on energy-saving and environmentally-friendly products for the home but is seeking agreement from other EU Member States first.

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