Tax relief for commercial property firms
THE commercial property industry breathed a collective sigh of relief following the emergency Budget, according to property consultancy Lambert Smith Hampton (LSH). While there are some areas which may be harmful, it was not as damaging as the industry had feared.
Peter Williams, head of LSH’s Peterborough office, said on the day of the statement: “The real impact on property will become clear when we see the small print but my initial reaction is that the measures outlined today will not hamper the recovery of our industry.”
The industry will be relieved that Capital Gains Tax (CGT) has not risen to 40 per cent as feared. However, the new 28 per cent rate for high income earners is still likely to deter potential new investors in the private rented sector. There are still concerns that the higher rate could squeeze UK property investors out, as foreign investors take advantage of the favourable exchange rates to gather high rates of return.
There will also be relief that capital spending will not be cut, resulting in the continuance of significant infrastructure projects, such as Crossrail. LSH said that it would be interesting to see whether the Government sees tax increment financing (TIF) as playing a role in the funding of these projects.
The reduction to Corporation Tax, albeit taking a staggered approach over four years, will also be welcomed. Fears that capital allowances would be greatly re- duced to fund this have proved unfounded, with fewer reductions than anticipated.
Mr Williams said: “We can expect to see a more level playing field between UK and non-UK resident corporate investors as those within the UK tax net will benefit from Corporation Tax reduction but will suffer from capital allowances reduction. However, non-resident investors, who pay basic rate income tax, will be worse off because they will not benefit from reduced corporation tax rates.
“The existing pressures of empty property rates (EPR), Energy Performance Certificates (EPC), and the burden of stamp duty, are making it more expensive year on year to own commercial property in the UK so the industry has been crying out for assistance in this Budget – the loudest calls being for empty rates relief reinstatement, the watering down of CGT increase and the green light for TIF infrastructure funding. It appears that two out of the three have been addressed.
“The REIT dividend treatment confirmation and the scrapping of backdated business rates on ports are also going to provide encouragement for our industry,” added Mr Williams.
no bar to recovery: Peter Williams, of LSH, whose reacted to the Budget saying that, overall, the measures were not as damaging as had been feared.