Tax Journal

Tax in Turbulent Times

20 April 2009

Continuing our series on 'Tax in turbulent times', Charles Beer and Eleanor Bosley of KPMG LLP look at the challenges and opportunities for users and owners of business premises in the current market

 Continuing our series on 'Tax in turbulent times', Charles Beer and Eleanor Bosley of KPMG LLP look at the challenges and opportunities for users and owners of business premises in the current market A recent warning from the British Retail Consortium that, 'This will be the toughest quarterly rent payment day for at least 18 years' serves to highlight the impact of the economic crisis on both users and owners of business premises. In the light of increasing tenant distress, landlords a refinding themselves with over-rented premises and increased risk of tenant default, which bring with them the spectre of vacant property with all its associated costs, not least empty property rates. Landlords are also facing downward pressure on rents from new tenants and demands for increased flexibility, including monthly rather than quarterly rental payments. For tenants in the happy position of requiring new premises, there is an opportunity to obtain highly competitive terms, but large numbers of tenants are left struggling with their existing portfolios of leases. Owner-occupiers too are facing tough decisions in relation to their portfolios. Some, especially those who used bank mortgage loans to acquire new assets during the boom years, may find that they are in breach of loan to value covenants as a result of the fast decline in property values. Others are facing cash flow problems due to difficult trading conditions, and wish to use their estates to provide a much needed cash injection. In this context, an ...

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