Real Estate & Retail: 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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