One of the less publicised elements of the Government’s spending review is the decision announced by Parliamentary under-secretary of state, Bob Neill on 13th December 2010 to scrap the business rate relief given to the owners of some empty properties.
At present empty properties with a rateable value of £18,000 or less are exempt from paying business rates. This was introduced by the last Government as part of a package of emergency measures to address the economic downturn at the height of the crisis in for fiscal year 2009/10 in a move specifically designed to help small businesses.
Ironically it was the Labour Government who only a year earlier, 1st April 2008, increased the empty property rate from 50% to 100% of the basic occupied business rate, after initial void periods elapsed. For most properties, excluding industrial, the void period is three months, on industrial properties, the void period is six months.
The change was intended to encourage owners to re-let, re-develop or sell empty non-domestic buildings. However given that most owners don’t leave properties empty by choice but rather because they can’t find occupiers it was hard to follow the logic of this argument. Many saw the move as a thinly disguised measure to raise tax.
One demonstrable effect of the measure was that millions of square feet of unoccupied offices, shops and warehouses were demolished by owners desperate to reduce their costs. It was also argued that it discouraged vital speculative development and regeneration schemes.
When in opposition the move was strongly citicised by Eric Pickles and Vince Cable. However the new Government is now arguing that they are being forced to take unpopular measures to “balance the books”. The effects of this move are yet to be assessed although the Government estimates it will raise some £400m per year.
Property focused organisations such as the R.I.C.S and BPF are lobbying the Government to re-think this move but so far the signs are not encouraging. One thing for sure is that there will be a lot of disappointed property owners when they open their rates demand for 2011/12.