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LONDON-Parliament yesterday debated the planned imposition of Stamp Duty on new leases. Until now companies have only paid tax on the first year’s rent under a lease, but from next month they will be required to pay tax on the net present value of all rent due for the term of the lease, a change that could raise some tax bills eight-fold, while raising another £200 million ($340 million) for the exchequer.

Oliver Letwin, this week appointed Shadow Chancellor in Michael Howard’s new opposition shadow cabinet, described the changes as a new “high street stealth tax”.

RICS commercial property spokesman, Kevan Carrick, said the retail sector would be hardest hit because multiple retailers, by definition, sign a larger number of leases than other businesses. “For new tenants seeking prime shops or offices the increase will be a significant additional up-front cost,” he said. “It is particularly bad timing because the new burden comes just as demand in the commercial property lease market is beginning to stabilise after nine consecutive quarters of decline.”

And agents report a rush of leasing activity as companies try to secure new leases. Chis Boulton, CEO of Lambert Smith Hampton said: “These changes have resulted in a distortion of the commercial property market as businesses attempt to renew their leases before 1st December, as well as an increase in companies taking shorter leases.”

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