scruttonbland.co.uk
PROPERTY AND CONSTRUCTION
VAT Zero Rating
Profit Vs Conscience
Biodiversity Net Gain Solution for Property Developers
Contents
3 Welcome to the Spring Edition Of Our Property and Construction Newsletter
8 Building Sustainably – Profit Vs Conscience
10 Electric Vehicle Charging Units – Coming to a Car Park Near You!
4 VAT Zero Rating of Installations of Energy Saving Materials (ESMs)
12 Biodiversity Net Gain
6 Research at the Suffolk Sustainability Institute, University of Suffolk
14 Meet the Team
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Welcome to the Spring edition of our Property and Construction newsletter
Since our last newsletter, the economy has entered a recession (technically), interest rates at the time of writing remain at 5.25% the conflict between Hamas and Israel continues, which is causing a strain on supply issues once again and the government released the Spring Budget. If you didn’t get to attend or haven’t had a chance to update yourselves with the announcements, there is a recording on our website.
I n this newsletter, we are focusing on sustainability and this theme carries throughout with a wide range of topics covered which I hope you will find interesting and informative. New planning legislation was introduced in February 2024 with a view to creating a 10% net gain on Bio Diversity for any new applications, we have Peter Thompson of Nature Based Farming detailing what they are providing to help meet this need and also details of an event we are holding in June to visit the site and see first-hand what this means for developers.
I comment on sustainability and the challenges developers are confronted within the day-to- day world of property development on pages 8 to 9. We also take a visit to Adastral Park at Martlesham Heath to see what research the University of Suffolk are carrying out to review energy consumption and sustainable construction methods. Our VAT team look at the VAT implications on renewable energy installations and we hear from Wendy Martin from Ellisons Solicitors who provides her insight on the legalities of Solar Panel and EV Charging point leasing.
We hope that you enjoy this edition of the Property and Construction newsletter, and if you would like to discuss any of the points raised or alternatively if you’d like to see any specific topic covered in future issues, please get in touch with me or your usual Scrutton Bland contact.
Ben Cussons Business Advisory Partner
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VAT Zero Rating of Installations of Energy Saving Materials (ESMs) What goods have now been added to the eligibility of zero rate? Our VAT team explains the legislative changes in more detail.
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T he supply and installation of to the reduced rate as technology has advanced. The scope of the relief was narrowed in 2013 when the European Commission ruled that the UK’s reduced rate in respect to buildings used for charitable purposes was not allowed in EU law. Following legislative changes, installations of energy-saving materials made between 1 February 2022 and 31 March 2027 are subject to the zero rate of VAT. certain energy-efficient products in residential properties has long been subject to the reduced rate of VAT. Various products have been added It is important to remember that in order to qualify, the supply must include the installation of goods. A supply of installation only will be zero-rated and thus too will the goods if they are supplied by the same person at the same time. However, a supply of goods only will remain liable to the standard rate of VAT. To be eligible, goods must be installed in the curtilage of residential accommodation and from 1 April 2023, charitable buildings. This includes dwellings and other ‘relevant residential purpose’ buildings such as care homes.
From 1 February 2024 the following goods were added:
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Water source heat pumps
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Batteries for storing energy converted from electricity
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Smart diverters, and
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Groundworks, or the dredging of a body of water, in order to install pipework or other equipment necessary for the operation of a ground or water source heat pump
Work required to ‘make good’ damage caused by or to ‘facilitate’ a supply of energy saving materials may be treated as a single supply covered by the zero rate, if it is done at the same time as the installation. HMRC provides an example of having a new loft hatch fitted to reach the roof when installing insulation. The relief for energy-saving materials applies to installations in residential accommodation. This includes dwellings as well as residential caravans/houseboats and relevant residential purpose buildings such as children’s homes, student accommodation, etc. As above, the relief is extended from 1 April 2023 to include charitable buildings that are used solely (95%) for a ‘relevant charitable purpose’. A relevant charitable purpose is defined as use otherwise than in the course or furtherance of a business, or as a village hall or similarly in providing social or recreational facilities for a local community. From 1 April 2027 onwards it is intended that the supply and installation of all energy saving materials will revert to the reduced rate of VAT of 5%. For more VAT advice contact our VAT specialist team on 0330 058 6559 or email hello@scruttonbland.co.uk
What goods are currently eligible?
Eligible goods from 1 February 2022 include:
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Controls for central heating and hot water systems
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Draught stripping
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Insulation
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Solar panels
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Wind turbines
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Water turbines
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Ground source heat pumps
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Air source heat pumps
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Micro combined heat and power units, and
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Wood-fuelled boilers
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Research at the Suffolk Sustainability Institute, University of Suffolk
Written by Dr Alison Pooley, with Dr Hannah Steventon and Prof Darryl Newport.
T he Suffolk Sustainability Institute is one of six research institutes based at the University of Suffolk. We are committed to tackling the causes of climate change, the impacts of which, alongside environmental degradation are amongst the greatest threats to public health, the global economy and biodiversity. The University of Suffolk takes a strategic approach to sustainable development and has seen the biggest decrease in carbon emissions out of nearly 120 universities across the UK since 2015/16, achieving a 64% decrease in Scope 1 and 2 carbon emissions between 2015/16 and 2021/22 (Scope 1 emissions are those caused from the combustion of fuel, while Scope 2 emissions are indirect emissions from the purchase and consumption of electricity supplied by the grid, excluding emissions from the supply chain, transport, and waste). Being part of a university that is making a real difference in carbon reduction is crucial to the work of the Suffolk Sustainability Institute as our aim is to bring tangible benefits at a global, national, and local scale as we work towards a low-carbon future. The Institute’s research is centred on three key themes: Green Infrastructure, Sustainable Healthy Communities and Energy and Resource Management. These themes span a range of emerging research
disciplines and pressing urban and rural sustainability challenges, underpinning our commitment to translate our research to be useful to everyone. The Institute promotes research opportunities and knowledge exchange through existing research projects and testing facilities, including the DigiTech Smart House, our living laboratory at BT’S Adastral Park, completed in 2022. The DigiTech Smart House, delivered through a partnership consisting of the University of Suffolk, the New Anglia Local Enterprise Partnership and BT, is a collaborative research facility that aims to demonstrate the regional capacity for designing, building, and occupying sustainable homes. The Smart House utilises systems to evaluate the performance of sustainable materials, low carbon energy and water consumption, addressing two pressing concerns – 1) climate change and the impact of the construction industry and 2) the chronic shortage of affordable homes and the UK housing crisis. The vision behind the Smart House was to present an example of an easy to maintain and comfortable home. Constructed as a ‘living laboratory’ for research to be undertaken: on the house as an operational building, in the house as a unique domestic research facility, and around
the house in its digital and environmental ecosystem. Using the house as a ‘living lab’ and demonstrator we are working with a range of innovation partners. The house, which has a gross internal area of 58m2, was initially conceived through a oneday design charette with our architecture students, and their studio tutor architect Ben Powell, with his practice Studio Manifest. The challenge was to reduce embodied cardon by 60%. This has been achieved through low impact post and beam construction using timber beams, with timber studs, the house has minimal materials in the ground to enable reuse and relocation. Embodied carbon calculations are ongoing as we adapt the home for different projects. The construction methods used at the Smart House are testing readily available materials and methods, such as offsite manufacture and use of panel systems. Part of the purpose of the house is to test these materials for future adoption, adaptation and retrofitting opportunities, for example the timber internal walls, with Woodfibre insulation, all have screw fixings for potential reuse. Although currently unoccupied, the house is designed as a home and contains a fully functioning kitchen, living room, fully accessible wet room and bedroom (on the first floor).
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With a small solar PV array on the south facing roof, mechanical ventilation and heat recovery (MVHR) and an air source heat pump, all of which are monitored for performance. Alongside using materials and technologies that are available to the industry now, we are additionally testing novel technologies in systems integration, connectivity, and home care, to inform our socio-digital futures. The Smart House represents an opportunity to test these new technologies and materials alongside our existing models, and this will develop as we install a building management system and adapt the house for future research projects. Recently we have been developing a garden watering monitoring system with smart rainwater storage and watering driven by moisture content sensors and increasing the
overall building management system. This type of research has direct impact by feeding into larger projects such as Reclaim the Rain. We are constantly collecting baseline data at the Smart House from indoor environment and air quality sensors, embedded sensors in the building shell, and the exterior weather station. This has been collated into data packs to share with suppliers, researchers and students. Most recently data was presented to students at our annual environmental data hackathon, sponsored by BT and the IET, it focused on connected places smart and sustainable living. Students explored data, responded to business and community challenges, and presented solutions, developing understanding of the data, technical and soft skills.
Smart House gives us an opportunity to address material use in construction. This has led to a collaboration with Natural Building Systems (NBS), who have built a prototype garden room adjacent to the house, using their unique, climate-positive, biobased, modular construction system. This small prototype is being monitored by the university, alongside the Smart House, for fabric performance and is designed to be demountable; the panels can be adapted, reassembled, and reused, and is one of several ongoing research collaborations with NBS. The Smart House presents us with a wonderful opportunity to share our research and to collaborate with others. If you would like to discuss research ideas or enquire about the smart house and the work we are doing at the Suffolk Sustainability Institute please email ssi@uos.ac.uk
As well as exploring technology in daily life, the
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Building Sustainably – Profit Vs Conscience
Your primary residence is likely to be the single biggest purchase in your life so what do you take into account when deciding where to live, Ofsted ratings of nearby schools, transport links, friends and family, nearby leisure amenities and work life balance? Ben Cussons, Business Advisory Partner examines the choices we have to make when looking for a place to call home and explores the various factors that influence our decision.
What if, as society shifts, we are more focused on the carbon emissions involved in constructing our homes and whether or not the homes is “green”?
Developers will assess the viability of a project by working backwards from what they anticipate the properties to sell for and deducting from this the costs to build, cost of land and general overheads. If the final figure that comes out doesn’t generate the wanted return, they will either revisit the plans or put them on hold. Land prices aren’t going down either and the open market will dictate what a property eventually sells for so the only part under a developer’s control is the cost to build and this is understandably where their focus lies. According to the World Green Building Council, approximately 40% of the worldwide carbon emissions are attributed to the construction of buildings and the energy needed to run them. World Business Council for Sustainable Development state that there is a 1% to 12% increase in costs to build green.
The housing market is already fiercely competitive making it difficult for first time buyers to get on the ladder. In the budget we saw the Chancellor announce the introduction of 5% mortgages for first time buyers in a bid to help, so a 12% increase in property prices to help enable builders to make the homes they build more sustainable would make purchasing a first time home even more unachievable for many. So should the government subsidise the building of sustainable homes as part of their plan to be carbon neutral by 2050? It is unlikely that a developer will seek to build in a more environmentally way focusing on their carbon footprint or sustainability of the materials used, whilst having a negative impact on their bottom line, but some will of course. What is changing is the way we power our homes with a shift to being more energy efficient, with air sourced heat pumps and renewable energy, partially driven by rapidly increasing energy prices over the last few years, but even that needs weighing up with the costs of install or conversion against pay back periods derived from ongoing costs savings.
I personally don’t think we are at that point yet, but it is certainly something to bear in mind.
Property developers, like any business owners, aim to generate a profit and do that by maximising returns on the individual dwellings or a development on the whole. To do this they will want to build as cost-effective as possible, whilst maintaining the quality of the delivered product to market. With a national housing shortage well documented and the costs of materials and labour at a premium, albeit they have reduced from the highs experienced in 2021, a developer will be very conscious of the costs of construction and the expected return and profit on sale.
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It is no doubt something we all grapple with in our day to day lives and a shift in mindset is needed to allow for us to engage and live in a greener world. If you are a property developer and are thinking about how you can build sustainably and would like to discuss this with Ben, or one of our Property & Construction team, please get in touch by calling 0330 058 6559 or emailing hello@scruttonbland.co.uk
The government is at least helping drive this change with their revised plan to phase out gas boilers in new homes by 2025 and ban them entirely by 2035. Furthermore, recent changes to the planning conditions for new developments which came into effect on 12 February 2024, stipulates that any new developments will be required to demonstrate a minimum of a 10% net gain on the Bio Diversity of the existing site. This will come at a great cost to the developer, further squeezing the margins made on each property and the development overall. Looking at the wider business world the UK’s Streamlined Energy and Carbon Reporting policy requires companies listed on a public exchange and large organisations to share energy use and carbon emissions information in their annual reports.
An organisation is deemed to be large if they meet two or more of the following criteria:
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A turnover of £36 million or more
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A balance sheet of £18 million or more
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250 plus employees
According to government statistics SMEs represent 99.9% of the business population in the UK and employ just over 60% of the UK workforce - so are these large organisations publishing information about energy use and carbon emissions going to have an impact on our spending patterns or are we more likely to look at the impact on what is in our pocket? Full sustainability at present is therefore unlikely to be the most profitable option and would need to be driven by legislation across the board if it were to have a real difference.
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W ith the government’s strategy to end the sale of new petrol and diesel cars by 2030, it estimates that there will be a need for around 300,000 public charging points (as a minimum) for the charging of electric vehicles. In response to this, there has been an increase in the installation of electric vehicle charging units in car parks, service stations, retail parks and any other ‘spare’ land suitable for a car park, which is good news for electric car owners, but also good news for land owners seeking to capitalise on this rising demand as a means to extract value from their landholdings, whether in the form of an additional income stream, driving up footfall on retail or other shopping outlets or for residential buildings, improving saleability by providing an additional amenity for residents. In all cases, it will also help improve the ‘green’ credentials of the landowner, and potentially attract more environmentally conscious tenants and customers.
Wendy Martin, Legal Director at Ellisons Solicitors, discusses what landowners should be considering when installing electric vehicle charging units, and why the structure of the provision needs to be considered carefully at the outset. Do you want to install and operate the charging points? This is challenging without the necessary technical skills, but there are specialist suppliers and contractors who can assist with the installation and ongoing maintenance and operation. A landlord may be approached by their tenant who wishes to install charging units within their car park or spare land. This would usually require the landowner’s consent for the works and any subletting to a charging operator. The most common option is to lease the land to an EV charging operator. There are a few of these, and no doubt competition in this section will only increase, but a landowner will need to research which operator would suit them and their landholding.
Where the decision is made to sublet space or contract with an EV charging operator there are several issues to be considered: Substations Is there sufficient power available on site for the operation of the charging points? If not, it may necessitate the installation of a new electricity substation near the site. This will require a separate lease to the local distribution network operator with associated cabling easements and land for the substation. Regardless of whether a new substation is required, where the power is coming in from does need to be considered and necessary easements and wayleaves entered into, particularly where such cabling runs over a third parties’ land. Lease terms Many EV operators require a lease of 25 years or more to ensure they can recover their initial investment. Whether the operator is given protection under the Landlord and Tenant Act 1954 is a key consideration, particularly where future development of the site may be contemplated and ‘lift and shift’ provisions are required.
Electric Vehicle Charging Units – coming to a car park near you!
Written by Wendy Martin, Legal Director at Ellisons Solicitors
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Consents Third party consents may be needed before a lease for EV charging units can be granted. For instance, the consent of a local distribution network operator for the substation and grid connections, consent of superior landlords or lenders to the letting and/or consent from adjoining or neighbouring landowners if easements or wayleaves are required. A landowner will want to ensure that they have the benefit of these consents, as well as the charging operator, so they can be utilised by the landowner on future charging stations, should they decide to contract with a different operator. Consideration also needs to be given to whether planning consent is required from the local authority. The landowner may decide this is something the operator needs to obtain.
Exclusivity The charging operator may require exclusivity for a period of time or in relation to a particular site. This needs careful consideration where a landowner has a large car park or several sites nearby, where there may be existing EV charging units installed, and also where issues of competition law may impact. It’s worth considering whether the exclusivity should be limited to a particular type/voltage of charger, or to a specific time period. This is a small selection of the many issues that need to be considered by any landowner and/ or landlord when navigating the installation of electric vehicle charging units. Each site and installation will need to be considered on an individual basis and should not be entered into lightly, but where implemented correctly could be beneficial to all parties involved. It shows commitment to being more environmentally responsible which in turn should attract more environmentally conscious tenants and businesses. If you are a landlord or tenant considering whether to install electric vehicle charging units get in touch with Wendy to discuss this by emailing wendy.martin@ellisonssolicitors.com
Rental values will be a point of negotiation between the parties. Many operators work on a profit sharing basis, although a landlord may prefer some form of fixed rent, e.g. per charging station, subject to the usual open market or RPI review. Landlord’s will want to ensure that the operator is responsible for keeping the parking spaces and charging units in good repair and condition throughout the term of the lease/ agreement. What happens at the end of the term also needs consideration and whether the charging operator will be required to reinstate and remove the charging units. This could be an expensive exercise and the landowner may wish to consider some form of security from the charging operator to cover these costs, which could take the form of a bond or retention. The operator will require rights of way over the estate roads to access the charging units, but this must be qualified with a requirement to ensure that the estate roads are kept clear, to avoid any obstructions on the estate roads for other users, and the operator contributes to any repair and maintenance of such roads.
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Biodiversity Net Gain
A Solution for Property Developers
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P eter Thompson, Managing Director of George Thompson Ltd and founder of Nature Based Farming shares how they are helping property developers achieve their Biodiversity Net Gain (BNG) quota. After much delay and prevarication by the government, BNG has landed. Biodiversity Net Gain went live on the 12 February 2024. This means all ‘major development’ sites must achieve a 10% measurable increase in biodiversity over the site (red line plan) baseline, this includes sites of 10 houses or more or more than one hectare. Small sites BNG went live on 2 April so any development (with a few minor exceptions) will also need to address BNG. Much has been written about BNG and it would be easy to spend weeks on end, watching or listening to webinars, videos and talks. In our view, many people are making it more complicated than it needs to be. At Nature Based Farming we use our own farmland and use other farmer’s land to create and manage BNG units which are available to purchase for developers who require off-site BNG if they cannot achieve enough units on-site.
We work with an experienced Landscape Designer, familiar with Local Planning Authority (LPA) demands, to ensure that clients get the BNG in the right place. While on- site seems a win-win it is worth remembering that BNG comes with legal covenants to ensure the habitat is created, managed and monitored over its lifetime. This can be in excess of 30 years and can create issues for developers who would not want to take on such obligations or pass them on to purchasers of the homes. This is where the off-site BNG is particularly valuable because the legal obligations to maintain it are on the landowner or farmer – like Nature Based Farming. So how is it going so far? Sadly, but unsurprisingly despite plenty of warning and all the delays the LPAs seem un-prepared. To create our off-site units, we have to agree our own s106’s with the LPA where our land is and the LPAs are taking their time to understand and resource these new additions to their responsibilities. Despite simple and clear templates available to include with planning applications for developers, the LPAs are still slow to understand the process. This does present a potential blockage for getting planning applications through the system and again when LPA’s need to be satisfied that BNG conditions have been discharged before work on-site can start. To understand more for your developments and your particular area please feel free to drop us a line for a chat by visiting www.naturebasedfarming.com At Scrutton Bland, we know that this is a topic that many of our clients and contacts are keen to learn more about, which is why we will be hosting an event specifically about this for property developers on Friday 7 June from 8.30am – 10am at Holt Farm, Great Oakley. For more information and to book your place please email events@scruttonbland.co.uk
For a developer, the first priority is to consider how much BNG can be achieved onsite.
You will already use an ecologist to undertake surveys on your sites before submitting planning applications. Now you need them to complete a survey of existing habitats and their conditions and enter that information into the statutory metric – an excel spreadsheet now in its umpteenth version which has taken the government years to develop. And, surprise, surprise, it still isn’t user-friendly. Once you have your baseline you need to consider whether you can enhance and restore biodiversity on-site as part of your site design. If you can hit your target on site, all well and good. If you can’t you need to make up the shortfall with off-site units and finally, if you can’t find off-site units you would have to purchase BNG credits from the government backed statutory credit scheme – which are twice the price of the BNG unit market price so something to be avoided. This process is known as the 3 step ‘biodiversity gain hierarchy’ and is something you should follow given BNG is now a statutory planning condition. On-site BNG appeals because it can potentially save the cost of buying off-site units.
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Meet the Team Our team of property and construction specialists regularly advise a wide range of corporate and owner managed businesses, from large civil engineering contractors to specialist craftspeople and have a thorough understanding of the opportunities and challenges facing the industry.
We seek to build long-term, trusted relationships with our clients. It is important to us that we understand our clients’ business and personal aims and objectives, in order that we can provide bespoke and personal advice.
Get in touch with a member of the team to see how they can help you.
Ben Cussons Business Advisory Partner ben.cussons@ scruttonbland.co.uk 01379 773532
Steven Burgess Audit Partner steven.burgess@ scruttonbland.co.uk 01473 945870
Jason Fayers Managing Partner and Tax Partner jason.fayers@ scruttonbland.co.uk 01473 945817
Sam Stent Associate Tax Partner samantha.stent@ scruttonbland.co.uk 01206 417280
Mark Smith Corporate Finance Director mark.smith@ scruttonbland.co.uk 01473 945732
Chris George Tax Advisory Partner chris.george@ scruttonbland.co.uk 01473 945836
0330 058 6559 scruttonbland.co.uk
@scruttonbland
0822/04/2024/MKTG
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