A new U.K. stamp duty could add a significant tax burden to long-term leases that will, in the long run, mar the cost-effectiveness of sale/lease-back transactions, said analysts at Standard & Poor's. "It's a tax that will certainly make things more expensive, as the economics will change for sale and leaseback transactions," said one analyst. "It's particularly significant for longer leases that could face net present value calculations that end up at 3.5%."
According to S&P, under the new stamp duty, the land tax regime for commercial leases is expected to increase the tax payable on the signing of new leases by switching to an upfront payment of 1% of the lease at NPV. "For leases with a life of more that 10 years, the proposed change may mean increased stamp duty payments of up to 10X," explained the analyst. "The higher lease pricing that results from the new taxation rules will affect both lessees and landlords of assets such as leased pub estates."