A Cautionary Tale

18th September 2007

T. Wyn Jones

One of the “stealth taxes” legacies left by our previous Chancellor Mr Gordon Brown prior to moving to higher office is the forthcoming change to the system of Empty Property Rate Relief in England and Wales.

In basic terms owners of commercial properties that are unoccupied, for whatever reason, do not have to pay rates (apart from retail premises where 50% is payable after the first 3-months). However from April 2008 rates will payable on all commercial properties - which is believed in many circles will have a significant adverse effect on the property and market as a whole.

In brief, office and retail premises will be given 100% relief for the first three months, and industrial and warehouse premises will be given 100% for the first six months, from when the property becomes empty. All rate relief for these properties will end after this time and the full Non-Domestic Business Rate will be chargeable.

Contrary to popular belief properties are not on the whole deliberately left vacant and a charge on empty property is certainly not an effective way of encouraging the redevelopment of vacant sites or empty property.

This is a repeat of the situation in the 1970s when an empty rate was introduced in the form of a penal rating surcharge. It didn't create new lettings then and it won’t do now. In fact the result back then lead in some instances to the deliberate vandalising of property to avoid rate liability – the direct opposite to what the Government allegedly are trying to achieve.

It is thought by many (and I am firmly in their camp) that this change is yet another revenue raising exercise cloaked in some other guise which has been decided with no thought of the potential consequences, which will undoubtedly affect many businesses.

Full details of the changes should be available at your local Council Offices or on the web site publicaffairs@rics.org. Remember the changes come into force on April 8th. If it is a shop or an office you have 3 months before you have to start paying the full rates if it is an industrial or warehouse premises you have 6 months before the full rates become payable.

As they say, “Forewarned is forearmed”.