Chancellor George Osborne delivered his autumn statement speech yesterday, highlighting the government’s economic plan. The autumn statement, which is the final one ahead of the next general election, includes measures that could directly impact on the co-operative sector.
According to the chancellor, the government will work with housing associations, lenders and the regulator to identify and lift barriers to extending shared ownership, which could include housing co-operatives. As part of this initiative, the government will launch a consultation on options for streamlining the process for selling on shared ownership properties.
Commenting on the budget statement, Nic Bliss, chair of the Confederation of Co-operative Housing, said: “The Welsh Government made a strategic commitment to co-operative housing – we are working with them to develop co-operative housing schemes.
“Because the UK government has not made the same commitment – and because there is not a coherent strategy to enabling the contribution that could come from community-led housing – it remains challenging to develop schemes in England. The most significant issue in housing is being able to build the 200,000 homes that are needed each year that could impact on escalating property prices. As yet, it is not clear what commitment there will be to supporting such development.”
Mr Osborne also announced plans to reform stamp duty. Under these plans, new stamp duty rates would entail no tax on house purchases up to the value of £125,000, a 2% tax on purchases between that and £250,000, 5% for properties up to £925,000, 10% for those of up to £1.5m and 12% for everything above that. The move would see a cut in the rate of tax for 98% of house purchases.
“Unfortunately reductions in stamp duty is likely to support existing home owners seeking to move,” said Mr Bliss, “and these moves could contribute to further house price rises which is damaging in relation to dealing with the housing crisis. I am not convinced that the budget statement will have a significant impact.”
The autumn statement confirms that all community energy generation undertaken by qualifying organisations will be eligible for Social Investment Tax Relief (SITR). The Enterprise Investment Scheme (EIS) tax relief will be retained until 6 April, but community groups eligible for SITR will continue to get EIS after this date, until the expanded and improved SITR is ready.
Co-operatives UK, the apex body for co-operatives in the UK, warns that further reform is necessary.
James Wright, Co-operatives UK policy officer, said: “In the summer, HM Treasury seemed keen on removing EIS relief for community energy co-ops – and it didn’t exactly roll out the red carpet for us when it came to SITR either.”
Co-operatives UK has campaigned for safeguarding tax relief for community energy co-operatives. Earlier this year the government launched a consultation on the impact the absence of SITR, EIS and VCT tax reliefs would have on community energy schemes. Co-operatives UK gathered evidence from 50 co-ops with over 1,000 members to show the ‘devastating impact’ of a compete removal of tax reliefs.
“We made a strong case for retaining EIS, at least until SITR was made ready,” said Mr Wright. “Along with the Community Shares Unit, we also made a great case for expanding SITR to EIS proportions – and opening it up to community energy co-ops.
“When it comes to EIS we have the crucial period of grace we asked for, which considering the position of HM Treasury back in the summer, is no mean feat. Once again it shows the value of working together. Everyone who helped in gathering evidence from the sector deserves thanks.”
The government will also increase the annual investment limit for SITR to £5m per annum, up to a total of £15m per organisation, from April 2015.
“The second piece of good news is that, subject to state aid approval, SITR will be expanded to EIS proportions and, crucially, will be opened up for use by the community energy sector. While HM Treasury seemed keen on the first part of this, the latter was no forgone conclusion and again the collective voice of the sector was crucial,” said Mr Wright.
Organisations registered as ‘bona fide co-operatives’ are due to lose EIS tax relief in April and they are also excluded from SITR.
“This adds to on-going difficulties arising from FCA (Financial Conduct Authority) policy covering this area, and will cause concern. But we want to make it very clear that co-operatives can and do use all legal forms. The model of the community energy co-operative is not under threat, and will be well served by the improved SITR,” he added.
“We are still convinced that bona fide co-operatives with a clear social purpose should be eligible for SITR and will continue to push this agenda. For us the introduction of a statutory asset lock for bona fide co-operatives is a priority for many reasons, and could be a game changer on this front for sure.”
In this article
- Co-operatives UK
- community energy
- community energy co-ops
- community energy schemes
- Community Shares Unit
- Confederation of Co-operative Housing
- Enterprise Investment Scheme
- Financial Conduct Authority
- George Osborne
- Housing cooperative
- Industrial and Provident Society
- James Wright
- Nic Bliss
- UK Government
- Welsh government
- United Kingdom
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