Skills shortage & increasing material costs hinder construction industry

Skills shortage & increasing material costs hinder construction industry

Labour shortages and rising materials costs are continuing to affect the construction industry and are putting development projects in jeopardy.

 

Material costs surge

Prices for copper, steel, concrete and asphalt have all increased throughout the course of 2021. Furthermore, British Steel has made seven price increases throughout 2021 for structural steel prices due to a surge in demand. Whilst prices increases are a significant issue at the moment experts believe that they will begin to settle within the next year as the economy settles.

 

Skill labour shortage causing issues in the construction sector

According to a survey in the Gleeds’ market report, 80% of contractors have said that they experienced issues with labour shortages in the last quarter. In addition, 70% expect those shortages to continue in the future.

86% of respondents believe that the full impact of the UK leaving the EU is yet to be seen as labour shortages are predicted to get worse.

Group executive director of Gleeds, Douglas McCormick has said that their survey has demonstrated the extent of the labour shortage which needs to be addressed by the Government.

 

The skilled labour shortage is a more concerning issue

Whilst we can see the light at the end of the tunnel in regards to material costs, the labour shortage is a much deeper issue. Not only is the labour issue predicted to get worse before it gets better, wage inflation means that workers can now demand higher pay which will continue to impact project costs for the foreseeable.

 

Summary

To summarise the prices for many common construction materials have surged throughout 2021. However, prices are forecast to settle throughout this year. The skilled labour shortage is currently a more concerning issue for contractors as 70% expect shortages to continue. The industry is calling for the Government to address the situation.

 

What next?

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How can we help?

Hawsons has a dedicated team of specialist property and construction accountants in Sheffield, Doncaster and Northampton.

Having an accountant who understands the challenges of this dynamic sector and is able to help you plan for the future is an advantage in a competitive environment. At Hawsons we have a great deal of experience in advising and helping businesses in property and construction and we can assist you as your business grows.

Our in-house tax team have advised in many aspects of taxation specific to the property investor including in the areas of VAT, Capital Allowances, Income, Corporation Tax and Capital Taxes.

Free initial meeting

Stephen Charles

Tax Partner, Sheffield

0114 266 7141

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Experts criticise the new cladding tax

Experts criticise the new cladding tax

Some senior figures in the construction industry have criticised the Government for focussing the new cladding tax on UK-based developers, as international developers will not be subject to the new tax.

 

What is the new cladding tax and when will it be introduced?

The residential property developer tax (RPDT) is a 4% tax on profits exceeding £25 million, which will affect UK developers from 1 April 2022. This tax was announced by the Government to help fund the removal of unsafe cladding following the Grenfell tower fire.

 

Who has criticised the new cladding tax?

When housing secretary Michael Gove announced plans to force UK developers to pay £4bn towards the removal of unsafe cladding, developers were outraged. In his announcement, he said that developers need to take responsibility and fix dangerous cladding.

John Mulryan, group managing director at Ballymore said that he believes that the company will be paying almost 6% on the tax due to come into effect this year as large developers cannot offset finance costs. In addition, he believes that all parties responsible for cladding should share the burden, not just developers.

Policy director at the Homes Builders Federation, David O’Leary later questioned the committee on why UK developers were subject to the cladding tax and foreign developers were not. The policy director said it feels like an unfair outcome when international developers can come in and not be subject to the same taxes as UK developers.

 

Summary

To summarise many UK-based property developers believe the new cladding tax is unfair as foreign developers and other responsible parties don’t have to pay any additional tax. However, housing secretary Michael Gove believes that developers need to take responsibility for dangerous cladding.

 

What’s next?

If your business is going to be affected by this you can contact our tax experts who can advise you on what to do next. If you would like to see more updates from us you can sign up for our sector-specific newsletters.

 

How can we help?

Hawsons has a dedicated team of specialist property and construction accountants in Sheffield, Doncaster, and Northampton.

Having an accountant who understands the challenges of this dynamic sector and is able to help you plan for the future is an advantage in a competitive environment. At Hawsons we have a great deal of experience in advising and helping businesses in property and construction and we can assist you as your business grows.

Our in-house tax team have advised in many aspects of taxation specific to the property investor including in the areas of VAT, Capital Allowances, Income, and Corporation Tax and Capital Taxes.

 

Free initial meeting

Stephen Charles

Tax Partner, Sheffield

0114 266 7141

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NHS Pension contribution changes pushed back

NHS Pension contribution changes pushed back

The government has announced that planned changes to NHS Pension Scheme contributions will be delayed until October after originally expected to be implemented from April.

 

What are the proposed changes to the NHS pension scheme?

From October members of the NHS Pension Scheme will see the top rate of contributions reduce to 12.5% from 14.5% over the next two years, a fall of 2%. Part-time GP’s and GP’s that don’t work all year round could benefit from the proposed changes. This is because the Department of Health & Social Care (DHSC) has decided to change the calculation of contributions to actual pensionable pay instead of notional whole-time equivalent pay.

These changes mean that we could see a contribution increase for NHS staff in lower-earning bands. However, salary increases would need to be managed carefully as NHS staff could be inadvertently put on to the higher pension contribution rate. Which could result in less take-home pay.

The plans would see the pension contribution rate change in October 2022 and again in April 2023. The aim of this change is to introduce a new contribution scale that reduces the steepness and number of tiers. It is important to note that these changes are still subject to parliamentary approval.

 

Contribution rates

  Yearly Salary £54,764 – £70,630 £70,631 – £111,376 Over £111,377
Pension Contributions        
Current   12.5% 13.5% 14.5%
October 2022   12.5% 13.5% 13.5%
April 2023   12.5% 12.5% 12.5%
         

 

Why did the government decide to delay?

In a consultation, the DHSC said that delaying the changes would allow pension scheme members to assess the impact it would have on their finances. With the increased 1.25% in National Insurance coming into effect in April delaying the changes to pension contributions will help mitigate the effect of take-home pay for NHS staff for the short term.

Accountants have warned that delaying this and implementing the change during the middle of a tax year would only ‘create complexities for practice payroll systems’.

 

Conclusion

To conclude planned changes to the NHS Pension Scheme Contributions will now be delayed until October 2022. The planned changes for NHS staff earning more than £70,631 per annum will see their pension contribution fall to 12.5% by April 2023. This is because the DHSC is looking to reduce the steepness and number of tiers to the NHS Pension Scheme Contributions.

 

What Next?

If you are unsure about how these changes will affect your pension plan. Our experts can advise you to help keep your pension goals on track. We offer all new clients a no obligation-free initial meeting to assess their situation.

 

Free initial meeting

Scott Sanderson

Partner, Sheffield

0114 266 7141

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What changes can we expect for farming in 2022?

What changes can we expect for farming in 2022?

The agriculture sector is facing a period of transition that will significantly change the way the industry operates. Rural businesses will need to find and generate new income streams as new opportunities present themselves. However, with these new opportunities comes new challenges as the agriculture sector faces increasing demand to reduce its carbon footprint whilst inflationary pressures are making everyday business more challenging.

In this article, we will be discussing some of the key changes that will affect farmers in 2022 and beyond.

 

Reductions in Basic Payment Scheme (BPS)

The BPS is the largest rural government grant and payment available to the farming industry but is set to end in 2028 with significant reductions year on year in the intervening period. Farmers can apply for this grant each year and will need to comply with some rules in order to receive the grant. This reduction is likely to create a financial shortfall for many farmers across the UK that will need to be addressed. Small increases in productivity will only be part of the answer for most farmers as different opportunities will need to be considered moving forward.

 

Defra introducing complicated new schemes

Defra has created a new domestic agricultural policy. This policy comes with the introduction of very complicated new schemes which farmers will need to quickly adapt to in order to benefit from them. However, we are currently in a transition phase where new schemes are being introduced and old schemes are being phased out, making it more complicated than ever.

One of the new schemes introduced by Defra across England is the Sustainable Farming Incentive (SFI) which will be available from Spring 2022. The ultimate aim of this scheme is to have 70% of farms and farmland across England to be part of the SFI by 2028. However, doubts have been cast about whether the schemes payments are lucrative enough to incentivise farmers to sign up.

 

Lump-Sum exit scheme and delinking

For those who are considering leaving their farm, Defra has announced a lump sum exit scheme. This scheme is designed to free up land for those wishing to pursue farming and existing farmers wanting to expand. The scheme offers a one-off lump sum for those looking to leave farming. Whilst the amount is most likely not enough to persuade farmers to leave, it may be suitable for those already considering an exit.

 

Environmental protection

The Environmental Act has now been passed by UK law. This act has been introduced to enhance the natural world for future generations. Lots of work still needs doing on the act but there is no doubt that significant changes will be on the way regarding the way farmers store and spread manure, slurry, AD digestate, or sewage sludge. Defra is also keen to set long-term legal binding rules on air quality, biodiversity, water, resource efficiency, and waste reduction.

 

Carbon management and trading

This is an exciting opportunity for farmers, and carbon trading has become a bit of buzz word recently. This is because you can now trade carbon credits generated from woodland, peatland and soil. However, there is still significant uncertainty about how carbon trading will work and where prices will settle. They also need to consider how much carbon their business is emitting. Once you have this knowledge you can calculate if you have any surplus that you can sell to third parties that do not affect their position from a financial, environmental, and reputational point of view.

 

ESG investing

The agriculture sector is being affected by the focus on Environmental, and Social Governance (ESG) considerations. Over the past few year’s businesses have started to put more emphasis on ESG and Corporate Social Responsibility in an effort to reduce their carbon emissions. This trend is having an effect on the agriculture sector as many businesses look to plant trees, get involved with rewilding and deliver other ecosystem services.

This presents an opportunity for farmers generate income streams from this increase in corporate businesses taking part in ESG investing. However, this does also come with a challenge as farmers have been vocal about losing productive farmland could impact food security.

 

How can we help?

Hawsons has a dedicated team of specialist agriculture accountants in Sheffield, Doncaster and Northampton. We know that farming isn’t just a business; it’s a way of life.

The rural and agriculture sector is a specialist sector, with unique practices and conventions, and we act for a significant number of arable farms and assist farming families in many matters specific to the sector including tax and will planning and succession planning.

We have been able to assist our farming clients in adding value to their businesses including advising on the financial and taxation consequences of property development, green technologies and capital allowance planning. In particular, we can assist in the area of capital taxes planning which is a significant issue for most farmers following the increase in land values and the availability of development opportunities.

Free initial meeting

Dan Wood, Partner

Dan Wood

Partner, Doncaster

01302 262 367

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Tax benefits of marriage

Tax benefits of marriage

Considering popping the question on Valentine’s Day? 

Here we look at some of the tax breaks married couples can benefit from and how it can pay to get hitched

 

The Marriage Allowance

The Marriage Allowance can enable eligible married couples and civil partners to save up to £252 of tax a year. And despite being introduced almost seven years ago, many eligible couples are still missing out on this tax break.

The relief is designed to benefit couples where one spouse has insufficient income to make full use of their tax-free personal allowance (£12,570 for 2021/22). Where the couple meets the qualifying conditions, the spouse with the unused personal allowance can elect to transfer £1,260 of the allowance to their partner, offering a tax saving of up to £252 for 2021/22.

It is also currently possible to backdate the claim to 6 April 2017, to obtain an additional tax saving of up to £968. Please note that the deadline for claiming the marriage allowance for 2017/18 is 5 April 2022 so time is running out to claim it.

The transfer can only be made if the spouse who receives the transferred allowance is a basic rate taxpayer, meaning that for 2021/22 they would normally need to have an income of no more than £50,270 (or £43,662 if you are in Scotland).

 

Inheritance Tax

If you are married or in a civil partnership, then anything you leave to your partner is generally free of inheritance tax (IHT).  Whereas bequests to others (and lifetime gifts made within seven years of death) attract IHT if the value of your estate exceeds the nil rate band (NRB) which is currently set at £325,000.

If your spouse or civil partner passes away you can also inherit their unused NRB (known as the transferable nil rate band), potentially allowing you to pass on up to £650,000 of assets to the next generation without incurring IHT.

In addition, the residence nil rate band (RNRB) was introduced in April 2017 and is currently £175,000 per person. Like with the NRB, if the conditions are satisfied it should be possible for any unused RNRB to be transferred to the deceased’s spouse or civil partner’s estate.

 

Pay less Capital Gains Tax

If an individual sells an asset (such as property or shares), they will pay capital gains tax (CGT) on any gain in excess of the annual exemption, which is currently set at £12,300 (2021/22). However, as both spouses have their own CGT exemption, with careful planning assets can be transferred so that effectively a couple can realise gains of £24,600 before CGT is payable.

Usually, when an asset is transferred from one owner to another this can potentially trigger a CGT liability; however, this does not apply when switching ownership between spouses.

By transferring assets between spouses, it can be possible to make use of a spouse’s lower tax rate or unused annual exemption.  It is important that tax advice is sought prior to any asset transfer or sale as there are pitfalls to avoid and there may be reporting requirements. To be effective for tax, the transfer to your spouse or partner must be a genuine outright gift.

 

Reduce Income Tax

If one spouse pays a lower rate of tax than the other, assets can be switched so they are owned by the lower-earning spouse.  Similarly, having your spouse as a shareholder or director in a limited company can help with tax planning – allowing you to maximise your available allowances and potentially pay tax at lower rates.

There are of course risks in giving assets away to unmarried partner – if you later split, they will legally own these assets and can walk away with them. In addition, there is anti-avoidance legislation that states that if you give assets away you can’t derive any benefit from them, but this does not apply to married couples.

 

Pensions

For married couples and civil partners who hold a final salary scheme, the surviving spouse will typically receive survivor benefits based on the final salary pension that has been built up by their partner, however this does not necessarily apply to couples living together.  Each scheme sets its own rules and the wording of the particular scheme needs to be looked at.  Some schemes stipulate that it can only be paid to someone who is financially dependent, whereas others will allow you to nominate a partner.

With regards to money purchase schemes, these are much more flexible, but do require you to complete an expression of wishes form to ensure that the nominated beneficiary receives the benefits in the event of death. Ultimately, the decision about where the benefits are paid rests with the Pension Trustees.

If you would like further information on any of these areas outlined above, please do not hesitate to contact us.

 

More from our tax experts

You can find all of our latest tax articles and tax resources here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Free initial meeting

Craig Walker

Tax Director, Sheffield

0114 266 7141

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