Anger over 'business stealth tax'

PROPERTY bosses and retailers have accused the government of hitting it with a new 'stealth' tax on building leases that will raise nearly £200m for Treasury coffers.

Changes to stamp duty on leases for shops, pubs and hotels will increase costs by up to eight or nine times, they said.

'This is a classic stealth tax,' said Shadow Chancellor Oliver Letwin. 'A more and more onerous business tax system will squeeze the lifeblood out of the business economy.'

Philip Martin, senior tax manager of Marks & Spencer, warned that the new regime will mean increased prices and job losses.

Under the existing system, businesses on a typical 35-year lease are levied 2% of one year's rent. But under the new regime, to start on December 1, businesses will have to pay 1% of the rent, for the life of the whole lease, above a £150,000 threshold.

Property trade bodies, as well as pub and retail groups, say the new system means that firms will take out shorter leases and that they will also avoid making long-term investment in fixtures and fittings.

David Melhuish, of the Royal Institution of Chartered Surveyors, said all parts of the property industry - including landlords and tenants - opposed the changes.