Retail organisations have joined forces in a last ditch effort to stop the government imposing a massive hike in stamp duty from December 1.
The group, which includes the British Retail Consortium, the British Property Federation, the British Beer and Pub Association and the Royal Institution of Chartered Surveyors, is planning to submit a letter demanding substantial amendments to the way the tax is levied.
They dispute claims by the financial secretary to the Treasury, Ruth Kelly, that some retailers would be better off under the new system, which requires retailers to pay 1% duty on the rent due over the full course of the lease, subject to a 3.5% discount, instead of the 2% of one year’s rent they pay now.
Kelly also suggested that retailers had exaggerated the punitive impact of the tax.
However, the BRC claimed that retailers faced an average 344% increase in stamp duty
and would be among the hardest hit businesses as they often traded in sought after properties or locations and were therefore tied into long leases.
It added that the average stamp duty for those taking out of town stores, typically let on 20-year leases, could rocket from £35,000 to £280,000. Only those paying less than £150,000 in rent in total - equivalent to about £17,500 a year - would avoid the levy, it claimed. The group is expected to repeat demands for the £150,000 exemption threshold to be raised. BRC assistant policy director, Rachel Burns said: “The threshold should at least double if it is to protect small and medium sized businesses. We are also looking to move away from the flat rate of 1% to a more graduated structure that sets increases in small increments.
“We fundamentally disagree with a methodology that capitalises rents - we do not accept that taking a leasehold is the same as owning a freehold.
She added: “The government says 60% of commercial transactions will be exempt. But our evidence suggests that only 29% of retailers will be exempt.”
Burns warned the huge sums involved were likely to prompt demands for shorter leases.
Liz Hamson