FLVA boss highlights trade fears over stamp duty
Tony Payne, chief executive of the Federation of Licensed Victuallers' Associations, has called on the government to reconsider its plans for stamp duty reform.
In a letter sent to thePublican.com he claims that the planned new regime will severely affect the ability of licensees to operate and buy their own pub property and will stop them taking out new leases.
The government announced that it plans to implement new stamp duty reform at the beginning of December through the new Finance Bill. The reform will see licensees charged duty based on the length of the lease rather than one year's average rent. It is feared that this could put the cost of a lease up by tens of thousands of pounds. The government has granted the industry a reprieve with leases worth a total of £150,000 being exempt.
Mr Payne said: "The effect of this would be to reduce investment in both businesses and properties, and could potentially result in the closure of pubs, as they become unviable to many licensees.
"By imposing duty over the course of the lease, we believe the government misunderstands the nature of leases. The purchase of a property results in the ownership of the property changing hands, and therefore becomes an asset to the purchaser. By contrast, the purchaser of a short-term lease sees no value from the purchase."
The British Beer & Pub Association has been campaigning against the government move, claiming it will force many licensees out of business and put the price of a lease up by thousands of pounds. In its recent research it revealed that a 30-year lease worth an annual rent of £80,000 would cost a new licensee an extra £13,114.
Accountant Ernst & Young has also warned that the proposals could be "seriously detrimental" to investment in the hospitality industry. Sale and leaseback deals, which many pub companies are using as a way of refinancing their businesses, could be hit as companies could be forced to pay 10 times the normal rate of stamp duty.
Lesley Ashplant, a hospitality and leisure consultant at Ernst & Young, said: "We would encourage the hospitality sector to join in a vociferous lobbying effort to deter the Chancellor from his current course."
Meanwhile, Punch Pub Company stated in its latest results that it plans to make representations to the Treasury to reduce the impact of the new legislation. But it says the current proposals would have a limited impact because of the government's proposed threshold, lower tax rates and the fact that Punch has the flexibility to create leases of varying length.
Impacts of reform:
- Slowdown in the turnover of licensees within leased pub estates
- A move towards shorter-term agreements
- Increase in development costs for the high street pub operators, who may reduce their rollout programmes
- A renewed focus on freehold property for new pub developments.
Information from Deutsche Bank AG.
