New Lease Duty Rules Will Drive Up Prices And Cost Jobs, Says CBI

by Jason Gorringe, Tax-News.com, London

22 October 2003

The Confederation of British Industry has criticised the UK government for pursuing controversial changes to stamp duty on leases, which it argues will drive up prices, cost jobs and curtail regeneration projects.

Under current rules, lease duties on rents are based on the length of the lease and the average annual rent. However, the new system will be based on the net present value of the total rent payable, a move which the CBI says will benefit the Treasury to the tune of several million pounds.

The CBI claims that many businesses could find themselves paying as much as eight times more in lease tax under the new system. It illustrates the point by citing the example of a retailer leasing a shop for 25 years at an annual rent of £120,000. Presently, the duty payable on the lease would amount to £2,400, but under the proposed system this would rise to £19,000.

"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.

"The majority of business premises are leased and duty increases on this scale will be damaging. This tax hike could easily swing the balance against marginal projects, undermining regeneration and costing jobs. Long term investment will be hit as firms look for shorter leases,” warned Mr Jones, continuing:

"Landlords, tenants and companies large and small have all called for these proposals to be modified. The Treasury and the Revenue are wrong to ignore the law of unintended consequences. The Chancellor must promise an early review of the effects of this legislation."

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