The proposals consist of four tax-break models based on current practice in the USA (see "Credit where it's due", right). Work that met certain criteria would get tax cuts.
Merseyside-based Maritime Housing Association has enlisted a team of American and British tax experts to work on the ideas.
The proposals are sure to be welcomed by a sector desperate for more private cash for neighbourhood renewal.
By applying its models to the market renewal pathfinder area in north Liverpool, the team will work up pilot schemes that will be presented to the Office of the Deputy Prime Minister and the Treasury for approval.
The aim is to bring hundreds of millions of pounds of private finance into urban regeneration. Maritime chief executive Andrea Titterington said: "There's a lot to do in the field of regeneration and there will never be enough grant money to do everything that we need to do."
Titterington has been working closely with the Treasury and ODPM on US-style tax credits since the publication of Lord Rogers' report Towards an Urban Renaissance in 1999.
At the summit tomorrow, she will unveil four proposals. The first is based on the community investment tax credit – tax breaks for firms that invest in small and medium-sized enterprises – which the government is already set to introduce in April.
Maritime's experts believe it should be enhanced to offer more attractive exit clauses and introduced alongside other pump-primed funding to encourage local change.
The second proposal, an urban regeneration tax credit, could raise £120m a year in public and private funding for renewal projects.
Allocation would be competitive; regional development agencies would award tax breaks to the schemes deemed most beneficial. Unused portions of the credit could be carried over to the next year.
The third proposal is for limited liability partnerships, which would take forward the work of the Housing Investment Trusts. The partnerships could concentrate on housing or wider regeneration and would pay no tax on the profits of their activities. Profits would flow through to the partnership members, who would then pay the tax themselves.
Maritime's fourth proposal is further tax breaks for redeveloping dilapidated listed buildings under the historic economic regeneration opportunity model.
Maritime's team of tax experts includes Bank of America senior vice president and public housing initiative director Daniel Anderson, Affordable Housing Institute founder David Smith and George Bull, a partner at UK chartered accountant Baker Tilly.
Credit where it’s due: the four proposals
- Community investment tax credit: a £50m per year, five-year fund under which individuals or corporate investors would receive a 5% tax break in return for investing in small businesses in deprived areas. It is proposed that investors be able to exit after five years.
- Urban regeneration tax credit: a one-off credit against tax made available to redevelopers in regeneration areas. Credit may be claimed by the redeveloper or sold or financed to convert into cash for redevelopment work. This could cost the government up to £60m a year, but could raise an extra £60m a year in private finance as credit matures.
- Limited liability partnerships: tax flow-through vehicles similar to housing investment trusts. Investors would contribute capital for specified housing investment, lowering the cost of debt and eliminating dual tax on income from certain types of investment.
- Historic economic regeneration opportunity: a one-off credit equal to 20% of the costs of regenerating buildings of national historic importance in renewal areas, allocated by regional development agencies. The tax credit could be claimed by the developer or sold to raise cash for the works. The cost to the government is estimated at £30m a year.
Source
Housing Today
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