Rise in lease duty will hit hospitality…
Leaseholders are likely to be paying five times more in stamp duty following the chancellor's announcement in last week's Budget that he will increase lease duty from 1 December.
The new rules, which were exclusively previewed in Caterer on 20 March (page 7), will use a calculation of net present value of the rent for the term of the lease and charge at a single rate of 1%. Premiums will continue to be taxed at the same rate as freehold transfers. Businesses in 2,000 enterprise areas, including Manchester and Leeds city centres, will be exempt from the duty.
David Wood, chief executive of the British Association of Hospitality Accountants (BAHA), slammed the increase. "This will make things five times worse than they were," he said. "People will be less keen to develop properties, expand and take on staff."
Bob Cotton, chief executive of the British Hospitality Association, believes the industry is already suffering under the present chancellor and that this decision means things will get worse. "A lot of our business comes from the over-50s on fixed incomes, who are being hit by big national insurance and Council Tax increases, and they are now being careful about what they spend," he said.
He is incensed that the industry will have to pay more for its leases. "Margins are very tight at the best of times, and this will particularly hit high-street businesses, because you will have to pay up front," he said.
Barry Laurie, chairman of the tax committee at BAHA, labelled the stamp duty proposals "potentially very damaging". But he believes there could be a little good news in that small businesses will be exempt where the net present value of rents over the life of the lease does not exceed £150,000.
The fact that the chancellor has cut Capital Gains Tax for small landlords could lead to more landlords selling leases, however. The chancellor also offered enhanced capital allowances to offset the cost of some environmentally friendly refrigeration equipment.
… while drinks industry slams ‘scandalous' hike
Gordon Brown's Budget was met with indignation from the drinks industry. The Wine & Spirit Association declared the increase of 3.5% on still and fortified wine as "scandalous and above inflation". Said Jo Williamson, the association's chairman: "The growth in wine consumption has already been slowing because of the state of the economy and it will be made worse by the latest increase hitting the British drinks industry, which has suffered so much from cross-border shopping, smuggling and fraud."
Williamson concedes that the sixth successive freeze for spirits is welcome, "but what we would really like to see is a sensible programme of duty cuts to enable us to compete fairly with our European neighbours".
Beer consumer group the Campaign for Real Ale (Camra) has hit out at the penny increase in excise duty on a pint of beer after freezes in the last two Budgets. "We understand the need to raise extra cash in this Budget," said Mike Benner, head of campaigns and communications, "but increasing duty reduces average consumption, which in turn reduces revenues from beer duty."
