Problems with the Empty Rates Tax are getting worse, as collapsing businesses are leaving more retail sites vacant, a Birmingham legal firm has said.
Williamson & Soden claims the liability to pay rates on empty commercial property has hit landlords hard at a time when it is not proving easy to find tenants, particularly for offices and industrial premises. The problem will also be compounded by the demise of Woolworth’s, Adams, MFI and Zavvi, which will result in an increasing number of retail sites standing empty.
The property industry stepped up its lobbying for something to be done, but Chancellor Alistair Darling’s decision to introduce a temporary increase in the threshold for empty rates relief for one year, from April 2009 to March 2010, has made no difference since it was introduced in the Pre-Budget Report.
This move was part of a £20billion package of tax cuts designed to boost the economy and the Government estimates it will exempt 70 per cent of properties. However, rating experts think otherwise, saying the Chancellor’s decision will affect properties with an annual rental value of about £20,000, which means the relief really only applies to properties worth less than £250,000.
Most unoccupied business property has been caught by the ERT since April last year. Industrial and warehouse buildings are subject to rates relief for the first six months that they are vacant, while most other commercial premises have three months of relief, after which owners are required to pay full rates for properties which remain unoccupied.
Property specialist Louisa Jakeman said: “The Government has justified its decision to charge full rates on empty business premises by saying it will help keep commercial property rents at a sensible level while also improving the supply of property in the marketplace.
“What the Government hadn’t bargained with is that its approach has led to owners demolishing vacant properties, especially business units on industrial estates, to avoid paying the Empty Rates Tax.
“Just when the Government has pledged to help regenerate urban areas, we are increasingly seeing levelled areas of wasteland where perfectly sound buildings have been razed to the ground.”