Tri-tenure developments have become increasingly common as an avenue for investors to develop residential schemes, especially for large-scale regeneration projects. With a blend of traditional for-sale, build-to-rent and shared-ownership housing (private and affordable), they cater for the varying needs of the residential property market and align well to local authorities’ social responsibility objectives. Furthermore, the BTR model allows for quicker market deployment as these flats tend to lease-up quicker than the traditional for-sale developments.

Here’s a quick run-through of some of the important UK tax features that may be applicable to tri-tenure/mixed-tenure developments, the opportunities and the risks.

VAT and residential property is always complex

One of the key challenges with residential property development projects is to maximise VAT recovery on acquisition costs and development expenditure. If the development consists of new residential units, then building work will often be zero-rated. A reduced 5% rate of VAT may apply to the conversion of existing dwellings (as opposed to “new” residential builds). However, professional services (e.g. architects, surveyors, and legal costs) will remain subject to VAT at 20% and, unless recoverable, can represent a material cost to the business.

In the traditional for-sale market, the supply of newly built dwellings is usually a zero-rated supply, which naturally facilitates VAT recovery. However, for BTR developments, short-term rental of residential units is usually an exempt supply which would prohibit the investor from recovering input VAT. In this scenario, it may be possible to implement a structure that facilitates VAT recovery, commonly referred to as “propco/opco” structuring, which involves the grant of a major interest (usually the grant of a lease of more than 21 years) in the developed property from propco to opco ahead of the ongoing rental activity in opco.

Care needs to be taken with implementing this structure, but it is recognised by HMRC as a legitimate way to facilitate VAT recovery on residential property development projects. It’s also worth mentioning that the VAT treatment of co-living units is an evolving area and it’s possible that the “letting” of these units may be treated as taxable supplies, depending on the specific features of the building and/or the nature of the business being carried-on.

A change of intention may trigger a corporation tax charge

It may be that existing schemes, which were originally set up to develop for-sale, are now considering pivoting to a BTR model. Such a change of intention could result in an appropriation of the property from stock to fixed assets in the company’s accounts, given that the property would now be held for long-term investment purposes rather than held for sale. This will represent a deemed disposal and reacquisition at market value, for tax purposes and any profit would be subject to UK corporation tax in the period of appropriation.

Unlike in the reverse scenario, there isn’t an election available to defer the tax charge by rolling the profit into the base cost of the property held in fixed assets. Therefore, this change of intention could result in a dry tax charge for the investor/developer.

The residential property developer tax should not apply to BTR

 In April 2022, the government introduced the residential property developer tax, which applies at a rate of 4% to the tax-adjusted profits on residential property developer activities over an allowance of £25m. The RPDT only applies to the activities of companies that carry-on a property development trade and so is relevant to the traditional for-sale market. However, the RPDT does not apply to BTR investors where the asset will be held for long-term investment purposes. In mixed-tenure sites, an apportionment methodology will need to be adopted.

While the £25m allowance may seem significant, this is pro-rated for short periods and only one allowance is available per group. In addition, when calculating RPDT profits no deduction is permissible for financing costs. These features of the RPDT legislation bring many developers within the charge to RPDT.

Stamp duty land tax reliefs may apply to certain investors

The residential rates of stamp duty land tax are very high, with rates topping out at 12% (and up to 17% if the 5% surcharge applies). By comparison, leaseholders in BTR schemes are very unlikely to be liable to SDLT as the rates applicable to chargeable consideration in the form of rent are unlikely to breach the minimum threshold.

From the investor viewpoint, the acquisition of developed BTR schemes will no longer be viable for multiple dwellings relief since the government removed this relief in June 2024. However, the lower, commercial rates of SDLT should be available instead for acquisitions of six-plus dwellings. For affordable units, these are also commonly acquired by registered providers of social housing or charities which can also benefit from specific SDLT reliefs.

In summary, the application of UK tax throughout the life cycle of a residential property development project is complex and needs to be navigated carefully, yet there are also opportunities too. These should be explored in detail at the outset of any project, so that a roadmap can be created to plan ahead and avoid any late surprises.

Property management might not always be in the spotlight but it is vital for turning a newly constructed building into an operational asset.

This demands a multidisciplinary approach to ensure a seamless transition from construction to occupancy. There are several challenges for achieving optimal building performance but overcoming them is an essential part of making buildings appealing to occupiers, landlords and investors.

Considering and acting on the points outlined below can help make smart buildings a reality, enhance occupier experiences, and prepare for future net zero targets, thinking about the needs of tomorrow, as well as today.

Optimising expertise from design to operations

Early engagement with property management professionals is crucial. This ensures assets are optimally designed and handed over from development or major redevelopment in a manner which allows them to be operated efficiently, maximising commercial viability, optimising the latest in smart buildings tech available and achieving sustainability goals.

Avoiding costly retrospective changes

In property management, planning is key.Development projects frequently encounter issues during the handover process due to decisions made in the early stages, often with little or no consultation with property or facilities management operators.

These issues can lead to significant post completion costs to correct or set up the asset for effective property management and value for money for occupiers. Creating sustainable, high-performing spaces Even well-designed buildings can fail to meet sustainability and net zero aspirations due to poor handover and building performance operations. This is highlighted in NABERS energy assessments, which are based on actual energy consumption once the asset is occupied. These assessments ensure there is no room to hide or overlook missed opportunities for improving energy efficiency.

By involving property management professionals with experience in energy performance optimisation and fine tuning early in the development process, buildings can be designed and operated to meet high sustainability standards, ensuring they perform well in NABERS energy ratings and other sustainability benchmarks.

Enhancing occupier experiences

A key aspect is enhancing the experience of building occupiers. This involves not only ensuring the building operates efficiently but also that it provides a comfortable and productive environment for its users.

Smart building technologies play a crucial role in this, offering features such as automated lighting, climate control, and security systems that can be tailored to the needs of occupiers. By integrating these technologies from the outset, property managers can create spaces that are not only energy efficient but also highly appealing to tenants. The development and handover of these complex systems to property management teams necessitate early stakeholder engagement and soft landings.

This should be followed by effective training and integration with property management systems, which are often procured post-construction in order to avoid implementation issues, delays, occupier frustrations, and erosion of trust.

Preparing for future net zero targets

As the world moves towards more stringent environmental standards, preparing buildings for future net zero targets is becoming increasingly important. Bringing in property management professionals at an early stage ensures sustainability is a core consideration throughout the development process and seamlessly into operation, rather than diminished or forgot during handover. This proactive approach helps to future-proof buildings, making them more attractive to environmentally conscious occupiers and investors.

The way forward The role of property management cannot be understated in the overall operation of a building. From early engagement to avoid costly changes, to creating sustainable and high performing spaces, through to the overall successful operation of the property and its ability to meet the needs of all stakeholders. By embracing a multidisciplinary approach and leveraging the latest technologies, property managers can help turn newly constructed buildings into operational assets that are efficient, sustainable, and appealing to occupiers, landlords and investors alike.

With each week bringing further changes, it appears the only things we can be certain of is uncertainty and the need for businesses within the real estate sector to be sufficiently adaptable to fend off the worst of the economic impacts should they materialise. In this piece, we explore the multifaceted challenges the real estate sector could face, as well as the potential opportunities.

Increased costs and supply chain disruption

While the recently announced reduction in the 25% tariff on steel and aluminium to zero, as part of the US-UK trade deal, is welcome, ongoing uncertainty may still lead to knock-on price hikes across global supply chains and operations, as well as uncertain project costs and reduced margins for developers and contractors. This could be exacerbated by disruption and delays to supply flow as international ports grapple with how to enforce new rules, causing further uncertainty to project timelines. The situation at British Steel only throws more fuel on the fire and, while the government rescue is positive news, the resolution here feels far from certain.

So where does this leave developers, contactors/suppliers, investors and occupiers in navigating a way through the uncertainty? Is there scope to diversify supply chains and source materials more locally to sidestep the tariffs and promote more sustainable building practices? What is the exposure to certain markets and impacts on cost/supply? What insurance cover is in place for such disruption and does that insurance remain available? Is there scope for negotiation of cost changes and shifts in supply chain dynamics?

There will, of course, be pros and cons for every scheme across the UK, but the need to review existing contracts for clauses relating to or affected by tariff changes and understanding which parts of a supply chain are most vulnerable will be a priority. It will be important to have early discussions around mitigation strategies and for all parties in a supply chain being prepared to be flexible and to share the burden in order to insulate businesses from impacts further down the line.

Financing and investment uncertainty

The economic volatility induced by the tariffs may also affect the availability and cost of financing. The cut in the UK interest rate to 4.25% is positive news as fluctuating interest rates and tighter lending conditions would make it more challenging for developers and investors to secure funding. However, the uncertainty surrounding future trade policies and fragility of global stock market sentiment could still make investors more cautious, potentially leading to a slowdown in investment activity.

If traditional financing becomes more constrained, we could see a growing interest in alternative funding sources, such as private debt and impact investing. These options can often provide more flexible and tailored financing solutions, enabling developers and investors to continue their projects despite the economic headwinds. Understanding the point at which a scheme could become unviable will be key in assessing the best alternative options and providing evidence of mitigation strategies within projects should improve the confidence of alternative creditors.

Market volatility

For occupiers, the tariffs will no doubt contribute to broader economic instability, affecting business operations and profitability, particularly to businesses in the most exposed sectors. This may lead to increased tenant uncertainty, with some businesses delaying expansion plans or renegotiating lease terms to mitigate risks. The logistics sector is likely to experience a reduced demand to export to the US, although some expect the impact may only be temporary given that UK exports to the US would become cheaper than exports from other countries subjected to higher tariffs. Sectors such as retail could also be affected, with reduced consumer spending influencing retail occupiers' ability to meet rental obligations.

Maintaining transparent and regular communication between landlords and occupiers can help build trust and facilitate a more collaborative and constructive approach to payment strategies and other methods of resolving any dips in cashflow experienced by occupier businesses.

Risk management

Effective risk analysis, impact management and detailed due diligence will be essential to navigating an uncertain economic landscape. Using scenario planning to understand the potential impact of different situations, undertaking market research exercises, stress-testing investment strategies and reviewing business continuity plans will mean businesses can better anticipate and manage potential risks. Assessing staff training and upskilling requirements to conduct these processes will be key.

There may also be scope to look for collaboration opportunities between developers, contractors, investors and occupiers, which can often lead to shared risk models, creative resource pooling and enhanced knowledge sharing to enable parties to mutually tackle challenges more effectively and capitalise on any emerging opportunities.

Conclusion

While the global tariffs imposed by the US government have undoubtedly created challenges for businesses, adopting a collaborative and “front foot” response may also present opportunities for innovation and strategic adaptation. Finding new solutions, alternative sourcing models and fresh ideas could ultimately make businesses more resilient in the long term and, in doing so, the real estate sector can navigate this economic turmoil and emerge stronger – something we have shown ourselves to be quite good at in recent years.

Joanne Purnell is a partner in Stevens & Bolton’s real estate team Joanne.Purnell@stevens-bolton.com

We now have the most pro-development government for a generation, with a clear intention to build 1.5m new homes in their first term and having quickly moved to set this ambition in motion. Yet planning is still being cited as an area of delay in terms of delivery.

Planning delays

Those who engage with the planning system are often astounded by its complexity and lack of speed. This has been an age-old mantra, certainly over the past 25 years, that planning is synonymous with delay and is viewed as a logjam to delivering development. The latter being a distinct factor in its increasing politicalisation. In theory, major applications are expected to take 13 weeks and 16 weeks for developments requiring Environmental Impact Assessments. However, few strategic developments – even those fully prepared – meet these timelines. One means of seeking to overcome these planning logjams for strategic delivery of key infrastructure was the introduction of the Development Consent Order in 2008 for nationally significant projects. This allows all technical matters to be fully considered with resultant planning and technical approval provided. Essentially de-politicising nationally important strategic infrastructure projects.

2025 logjams

However, to understand delay within planning, the reasons have to be understood, inevitably matters are somewhat more nuanced than a soundbite or headline portrays. There are at present a number of pertinent reasons for delays to the planning system. There have been years – arguably decades – of underinvestment within council planning departments. Public resources are scarce, political priorities often gravitate investment of resource towards social care and education. In addition, other key statutory consultees in the public sector are also similarly underfunded and the reasons for delay become somewhat clearer. Another factor is the Treasury – at the chancellor’s request – is also undertaking a “reassessment” of capital-funded infrastructure projects (new or improved roads/bridges/junctions etc), which started last summer and will not be completed until Autumn 2025.

Many of these schemes have full planning or Development Consent Order approval and their ability to proceed – via previously fully committed government funding (last Conservative administration) – is contingent to tens of thousands of new homes/development coming forward. It isn’t hard to understand developer frustrations with planning logjams, as it is inevitable this current pause for reassessment will result in certain schemes no longer having government funding or reduced funding. In short, this means currently anticipated development either being significantly delayed or not coming forward at all.

Solutions

A number of the potential solutions to unblocking the planning system include the recruitment of more planners within local authorities, allowing public resource to be ringfenced, and enhanced and expanded career-long training and development programmes for planners. There is also an argument for fewer consultees or, indeed, their comments to become less binding. It is also considered that as we are in an unprecedented housing crisis, the scope of DCO should now be expanded to include residential developments of more than 300 homes as strategically nationally important development. A further idea is to unlock funding through the reform of derisking practices by pension fund managers, providing significant new investment for shovel-ready infrastructure projects across the country. This in turn may provide vital reassurance of viability to developers for large-scale proposals.

Colliers will be co-hosting a roundtable at UKREiiF 2025 on 21 May, covering regional economic liquidity and infrastructural development.