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Assetsure News 12th August 2008
Empty Property Tax
Hitting Commercial Landlords
A new tax on empty buildings and properties is hitting
businesses, putting off commercial developers from implementing new builds,
investing in re-generating the of old (empty)
commercial buildings and causing an increasing un-economic number of
buildings to be demolished. Businesses, large and small that occupy commercial
premises, that includes empty units, are having to pay the new empty property
tax, which now takes up a very large portion of the average lease. Unrented
commercial buildings have gone up 22% in 2 years to over 9%.
The April 1st 2008, tax change in 'empty rates relief' now means
that, as the number of
empty properties increase from the economic slowdown, the greater number of
commercial
landlords are paying more tax on property that makes them no rent. The
changes mean that industrial property that remains empty for more than 6 months,
now face 100% rates bills and the same applies to commercial property after
three months. Prior to the tax changes, owners of empty commercial office space
and commercial buildings, received 50% business rate relief.
It has been widely condemned as a Government £1bn ‘tax grab’. The
Treasury estimated the implementation of the tax will raise £950 million in
2008/9 and another £900 million in 2009/10. Due to the falling tenant commercial
occupancy rates it is likely that an additional £142.5m could now be raised in
tax revenues. 35 rebel MPs have already signed an Motion for the tax to be axed.
Labour MP Chris Mullin said the tax would "send firms bankrupt within months".
Many small commercial business owners face bankruptcy because
they cannot afford to pay the new tax without rent to offset it against.
Commenting on the removal of the relief, David Frost, Director General of the
British Chambers of Commerce, said:-
"We are very concerned that removing tax relief on empty
buildings will act as a brake on regeneration in many of the country's most
deprived areas..." "The relief was an incentive for businesses to bring empty
commercial and industrial property back into use and it has benefited many of
the poorest communities.... "At a stroke, the government's new policy will hit
disadvantaged areas and create financial insecurity for companies currently in
possession of empty properties. This is little more than another tax hike on
business."
Prior to the empty rates tax changes, landlords held onto
commercial property earmarked for possible redevelopment and let on a short term
lease basis to maintain the investment. The speculative risk has now become
uneconomical in a bear property market, forcing developers to accelerate
demolition, at a time when new builds are not keeping up with demand..
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