Phil Nicklin, Real Estate Tax Partner at Deloitte comments on the key property tax changes announced in this year’s Budget.

Empty Property Relief
The Chancellor is aiming to raise approximately £1 billion a year from 2008 by restricting Empty Property Relief (EPR) from business rates - now only 3 months for all property (formerly 100% relief for 3 months and then 50% thereafter) except for industrial and warehouse properties which is 6 months (formerly 100% exemption indefinitely).

Commenting Phil Nicklin said: "The Government would like this measure to encourage empty properties back into the letting market. Ironically it could encourage owners to partially demolish them to take them off the rating list altogether."

Property Authorised Investment Funds (AIFs)

The Government has set out a framework for AIFs that will give them a level playing field with closed-ended REITs. AIFs are Open-ended Investment Companies (OEICs) investing in property and the proposed framework will offer no tax at the fund level, with investors taxed as if they owned property directly.

The proposed regime for AIFs will require them to separately stream their property income, UK dividends and other income, both at the fund level and investor distribution level.

Nicklin said: "Currently there are over 20 Unit Trusts and OEICs that have invested in £13 billion of property. The proposed changes are welcome, but the systems and administrative changes necessary to cope with streaming the different types of income are likely to be burdensome and unattractive."

Planning-gain Supplement

This is a proposed levy on value uplift accruing to land granted planning permission. The Government is considering the responses to the consultation process which ended in February 2007. If it’s deemed workable and effective, it will be introduced no earlier than 2009.

Phil Nicklin said: "The property industry generally regards this tax as unworkable, particularly from the valuation point of view and would like to see the Government drop it."


In the Pre Budget Release, the Government announced that it was relaxing the 'Day 1' conditions for the REITs regime, to make it easier for a newly-established company to become a REIT. Whilst no mention was made of REITs in the Budget, changes to the regime are expected to be announced soon.

Phil Nicklin commented "We expect legislation for this and new regulations in relation to corporate joint ventures partly owned by REITs, to be published with the Finance Bill in about a week's time."

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