Press release

BUDGET BRIEF FOR WEDNESDAY

Date

7th March 2008

Description

Various items in this week’s Budget are of interest to the property industry. It potentially provides the government with the opportunity to revisit and hopefully reconsider some of the proposals that have been conceived over the last 18 months and which are due to take effect in April

A letter written to the chancellor is attached below along with our statement on Empty Rates, the main issue to come out on Wednesday.

The BPF believes that measures are needed now, especially given the recent changes in economic circumstances and to prevent further damage to an industry that is important for the UK economy.

The BPF has identified below, measures which were introduced last year but which take effect following the 2008 Budget and will increase costs for the property industry and occupiers. We have also discussed measures which the government could consider taking in Budget 2008 which would provide a much needed stimulus to the industry.

Government legislative changes taking effect

 Capital allowance amendments – Capital allowances are the method through which tax relief is taken for items of capital expenditure by businesses. The 2007 budget has removed an entire class of asset from qualifying for relief (industrial buildings and hotels) as well as significantly reducing the overall rate of relief at which most assets will qualify. The effect of this is a very real cost for businesses because the absolute amount of tax payable increases and there is also an acceleration of tax payable.
 Empty property rates relief – Government announced last year that this relief from business rates for empty properties is to be removed from April 2008. These changes will have most impact on secondary locations, which are already feeling the heat from recent changes in the economy, and areas most in need of investment and regeneration.
Potential 2008 Budget Measures – to mitigate negate the above concerns
 Empty property rates relief – Government could consider delaying the introduction of changes to relief from business rates for empty property by one year pending further review. Alternatively, Government should use the power granted to it by the Rating (Empty Properties) Act 2007 to reduce the level of empty property rates for the 2008/09 rate year from 100% to 50%.
 Stamp duty reform – The commercial property market is currently very quiet with a low volume of transactions. Government could stimulate the market through a temporary stamp duty holiday as was used during the recession in 1992. This would make deals more attractive and therefore increase activity in the market. A more effective measure for providing a stimulus to the residential market and a fairer system for first time buyers would be to increase the thresholds at which stamp duty applies. This would significantly reduce the cost of purchasing a home. The tax take from stamp duty has increased from £830m in 1997/98 to £6.5bn in 2006/07 which reflects the fact that the stamp duty thresholds have not risen in line with the property boom of the past 10 years.
Other expected Budget announcements impacting the property industry
 Taxation of Foreign Profits – Government is expected to announce a consultation with industry on proposals to change the UK’s approach to taxing the foreign profits of UK based companies. Indications are that UK-based international property companies may have a significantly increased administration burden of complying with this regime. At a time when other measures such as the Non – Dom rules look to be reducing the UK position as an international finance centre, this is of particular concern to us as we await further announcements.

BPF press contact Andrew Teacher on +44 7841 732 194

Downloadable documents

BPF letter to the chancellor - 65kB.

BPF blast Empty Rates move as 'disastrous' - 44kB.