Gary Bailey, Director at Lancashire Mortgage Corporation, said: “Bridging finance has always been an option for businesses that need to raise capital quickly for a variety of purposes, but in the current climate the emphasis is definitely shifting to covering expenses rather than investing in growth and acquisitions.”
Bailey says that one of the principle drivers for bridging finance enquiries has been the recently introduced “Empty Rates Tax”. From April 2007 the tax has required commercial property owners to pay 100% of the business rates for a property that has lain empty for over 3 months (6 months for warehouses and factories). The chancellor has announced that in 2009 the tax threshold will be raised to exclude properties with a rateable value of under £15,000, but calls from a variety of trade bodies to abolish it altogether have not been answered.
Bailey continues: “We’ve seen property owners hit with six-figure bills resulting from the empty rates tax and they are handling them in two ways.
“The first of these is to pay the bill, but some businesses can’t access the kind of sums required within the necessary timescales. Bridging finance has historically been used to help pay a variety of business taxes such as corporation tax, stamp duty and VAT; now it is being used to cover this additional expense too. However, in the current climate we’ve also encountered a number of property owners seeking bridging finance to pay for the demolition of a site and avoid incurring the tax altogether!
“In a buoyant market the empty rates tax might not present such a problem for property owners, but for many it’s a burden that their business simply cannot afford to bear at the moment, and sound commercial stock is being lost as a result. I believe that the government should reconsider a moratorium on the tax until such a time as economy begins to improve.”
