Anger over business lease reforms

Taxing times for the High Street?

Business groups have hit out at changes in the way commercial leases are taxed, claiming the reforms will hit retailers hardest, and could drive up prices on the High Street.

Under the new system, stamp duty will be based on the net present value of rent payable over the entire length of the lease, rather than on average annual rent.

Sixty percent of leases will pay less tax as a result of the reform Treasury spokesman

According to the Confederation of British Industry, the change will unfairly penalise companies, such as retailers, that have longer than average leases.

The CBI claims that a retailer with a 25-year lease and annual rent of £120,000 would see their annual stamp duty bill rise from £2,400 to £19,000 - an eightfold increase.

"It's extremely disappointing that the government, in its inexorable search for new areas to tax, is targeting the one sector that has kept the economy afloat : the High Street," said CBI director general Digby Jones.

Crackdown

"This tax hike could easily swing the balance against marginal projects, undermining regeneration and costing jobs."

The Conservative Party echoed the CBI's criticism, claiming that the new system would increase tax revenues on business leases from £50m a year to £230m.

"This is High Street robbery - one of Labour's 60 tax rises since 1997," said Shadow Financial Secretary Mark Prisk MP.

But the government said the reform was aimed at cracking down on tax avoidance by large firms, adding that most businesses would in fact pay less stamp duty under the new scheme.

"Sixty percent of leases will pay less tax as a result of the reform," a Treasury spokesman said.

"It is also entirely misleading of the CBI to say that this will damage regeneration, since the government has specifically exempted all commercial property from stamp duty in disadvantaged areas."