commercial property 27
Tax and structure should help protect cashflow
With current economic conditions potentially adding pressure on profit and cashflows, Neil Thomas, head of Baker Tilly’s regional sector group, gives his views on some areas where property businesses need to focus their attention in order to strengthen their positions
Some of the key issues property and construction businesses should consider are:
• A review of their business structures to ensure they are the most effective from both a commercial and tax perspective. For example, a limited company isn’t always the most appropriate vehicle and there could be significant tax planning advantages and/or valid commercial reasons to consider the use of partnerships (including LLPs) or possibly hybrid structures involving both corporates and partnerships.
• With reductions in capital allowances coming into force in April 2012, ensuring that tax relief on plant and machinery (including that contained within commercial
properties such as integral features which can often be missed), is maximised. Most plant currently attracts a 20% annual allowance, which will be 18% from April 1, 2012, although certain environmentally friendly assets can attract 100% relief.
• VAT legislation and its effect on property transactions can be complicated, particularly given the regular changes introduced by HMRC. In general, commercial property can be exempt from VAT or be standard rated. The choice of whether or not to opt to tax the property (so that the exemption from VAT is waived), is important in terms of whether VAT can rightfully be reclaimed but the ramifications for the future also need to be borne
in mind. It is therefore critical that appropriate advice is taken in advance of any transactions.
• Construction businesses often use self-employed sub-contractors rather than employees. However HMRC will look closely at employers’ records to ensure that workers who have been paid without tax and National Insurance being deducted at source are correctly classified as self-employed. A worker’s status is not a question of choice but depends on certain facts. The risk of an incorrect classification can result in hefty settlements having to be made by the employer and HMRC is taking an ever more aggressive line in this area.
Deals above 5,000 sq ft up from last year
Take-up across Southampton for the first half of 2011, although lower than the comparative period last year, showed a marked improvement in terms of unit size, according to CB Richard Ellis’ half year regional offices’ review.
Take-up of units of more than 5,000 sq ft reached 39,419 sq ft across six deals and while this was just over half the total take-up recorded in H2 2010, it is a positive outcome when compared to the same period last year when there were no recorded deals above 5,000 sq ft. The largest deal completed was the 10,000 sq ft letting to E-Digital at Vanbrugh House. Other significant deals included Lucite which took 7,320 sq ft at Cumberland House, 6,000 sq ft of Grade A space was let to i2o Water at 4 Benham Campus while 5,000 sq ft transacted at West Park House in the second quarter, to the Health Insurance Group
CBRE south central regional managing director, James Brounger, said: ”Although take-up has been relatively low, those deals we have seen have been companies with
lease breaks and expiries, rather than inward investment into the Southampton area. As with 2010, demand appears to be coming from businesses which have a consolidation or rationalisation reason to relocate rather than for any expansionary reasons. We do not anticipate much change over the coming months with demand largely expected to remain static through the rest of the year.”
Most cities had a quiet start to the year. However activity started to pick up towards the back-end of the second quarter with a large number of deals to be closed in the third quarter. The clear winner so far in 2011 is Aberdeen which had an exceptionally strong first quarter, by mid-year take up in the city was already well ahead of its 2010 total with record prime rents of £31 per square foot.
On the whole, new supply has decreased while secondhand space has edged up, or at the best remained unchanged. The only exceptions are Liverpool and Bristol which have both seen an increase
THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – OCTOBER 2011 Neil Thomas
Baker Tilly’s property and construction group assists and advises businesses on all aspects of property usage, ownership and construction. In the south the firm has established a dedicated team which provides a multi-disciplinary approach to help businesses with the challenges of a demanding marketplace.
Details: Neil Thomas 07973-816233
neil.thomas@
bakertilly.co.uk www.bakertilly.co.uk
market. The most significant deal so far this year in Southampton is the purchase by Standard Life of 1 Dorset Street, a prime multi-let building totalling 25,129 sq ft over four floors with an average weighted unexpired term of 5.5 years and passing rents of between £17.50 and £21.15 per square foot. Originally marketed at 7.5% initial yield, the property transacted at 7.9%. The second completed deal in the city centre is Kings Park House, 22 Kings Park Road, a 14,170 sq ft building let to Coffin Mew Solicitors until 2019. A yield of 8.1% initial has been achieved.
James Brounger
in new space, both cities seeing speculative schemes reaching completion. The investment market has also had a subdued start to the year, with overall purchasing activity down. A total of £2.09 billion of stock has been purchased in 2011, boosted by the sale of Chiswick Park, a business park in West London.
Across the south central region, the first half of 2011 has seen very few investment transactions, largely due to a low volume of stock coming to
Added Phil Owen, capital markets director at CBRE in Southampton: ”Central Southampton prime yields are currently at around 7%, moving out slightly from the 6.75% we saw during the past two years. With the dearth of comparable evidence it is difficult to be sure of the current gap between prime and secondary yields and how this has changed during the past 18 months. Based on the wider regional marketplace, we believe the gap is getting bigger and will continue to do so as the banks release further distressed assets and interested parties drive even harder bargains with offers and pricing levels.”
www.businessmag.co.uk
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44