Regeneration experts at Browne Jacobson are calling on the Government to give the green light to a US style tax scheme that could help to regenerate local communities.

The scheme, known as Tax Increment Financing (TIF), is based on a US model introduced in the 1950s. Under the scheme councils would be able to borrow money from private sector investors and secure the loans against the expected increase in business rates generated by improving the local area.  

The extra tax generated as a result of the increase in the rateable value of commercial property following a redevelopment would be used to pay back loans from investors.   Currently, business rates are paid direct to the Treasury, but under the TIF scheme the additional tax revenue from designated local areas would be ring-fenced and paid back to investors. The interest on loans paid to investors is likely to be tax exempt.   

Some of the largest councils in the country have already expressed an interest in the idea and the Government is expected to make an announcement in the pre-budget report in November this year.

Dominic Swift, Head of Property at Browne Jacobson, said :

 "The scheme is an excellent way of kick-starting redevelopment schemes that have stalled because of the economic climate. It's a win - win scenario for everyone. Councils no longer have to find the money for schemes upfront, private sector partners can secure their investment against tax recouped, local residents could see a rise in the value of their properties and local businesses benefit from increased trade as more people move into the area.

"As with any investment scheme there are risks and pitfalls and the Government would need to look closely at the American experience to make sure we do not repeat the same mistakes. In a recession it is important to look at innovative ways to generate new income streams and TIF could just be the knight in shining armour that many councils and investors have been waiting for. Without schemes such as TIF there is every danger that the regeneration industry could grind to a halt."