Government to review empty rates legislation

The Government looks set to review empty property business rates legislation says commercial property agent Prop-Search, after reports that it is spending more than £50 million in tax per year on its own properties.

Chancellor of the Exchequer, George Osborne, has now asked Conservative MP Julian Sturdy to form a working group to produce proposals on how the empty rates rules could be changed.

Samantha Jones, a Surveyor at Prop-Search, said: “This news shows that the commercial property industry’s criticism of the so-called ‘bombsite-Britain tax’ has not fallen on deaf ears.  Although it is disappointing that the review comes on the back of the cost of this tax on the public purse, rather than the financial penalty imposed on developers and businesses with empty buildings.”

Business rates are charged on most non-domestic premises including shops, offices, warehouses and factories.  Owners of commercial properties such as shops and offices are exempt from paying business rates on an empty property for three months after the property becomes vacant, while industrial properties remain exempt for six months.  Buildings with rateable values below £2,600 are exempt until they become occupied again.

Until this legislation changed in 2008, owners of commercial property – shops and office – previously received a 50% relief after the three month exemption had passed, whilst industrial premises had a permanent exemption.

Prop-Search reports that it is hoped that the working group will propose a three year exemption on business rates for new development, aimed at encouraging regeneration, plus a full exemption from business rates for low-rateable value properties of the type normally occupied by smaller businesses.  It is thought that the group will also press for a full impact assessment on the burden that empty rates pose to the property industry and wider economy.

Research published by the British Property Federation in March this year showed that the total cost of empty property rates in the UK had risen by over 400% overall, and by 900% for industrial properties since 2006 – while the vacancy rates had risen from 7% to 9% in the same timeframe.

Samantha Jones added: “The majority of investors and landlords are trying hard to mitigate the effects of the economic downturn and working with tenants and agents to keep properties occupied.  Through no fault of their own, they are lumbered with this burdening tax which has also hampered new development.”