Empty Buildings - deep pockets required

23 April 2008

Developers and property owners will soon hear the worrying sound of extra tax bills hitting their desks as the Government's latest move to raise cash from the property industry comes into effect.

Despite vigorous campaigning by industry lobbyists, on 1 April the Government scrapped the relief on empty business rates.  Critics say this could lead to anything from a significant freeze on development to the growth of industrial wastelands.  Previously, industrial property was given 100 per cent rate relief when unoccupied, while other commercial property such as shops and offices won a reprieve for the first three months and then 50 per cent relief.  From 1 April, industrial property will be exempt for the first six months of vacancy, and other buildings for three months, before having to pay the full amount.

It is an easy target for the Government and makes a certain sense. The public is unlikely to be sympathetic to property developers, and it is estimated that the move will raise some £900m annually. The Government hopes, meanwhile, to encourage occupation of empty buildings.  On the other hand,  the new rules have worrying implications for development in the UK, and there is a risk that the burden of costs will get passed to the shareholders of property companies.  According to consultant DTZ, the change in rate relief on empty property will reduce annual net income by almost 4.5 per cent for industrial property investors, which equates to a sum of roughly £250m.

What should you do?

  • Review your portfolio and likely voids.
  • Calculate the rates that will become payable on any empty properties from 1 April.
  • Consider how to reduce the associated empty rate liability.

How can we help?
There are a limited number of measures which you can use to mitigate the impact of the new empty rates rules.  A small change in the way a property is held or managed may make a big difference.  We can help you decide what tactics might be best for you.

 

Contacts

If you would like further information on this subject please get in touch with your usual contact or:

Nichola West,
Partner, T: +44 (0)20 7320 6217

 


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