Retailers angry over new goverment diktat

March 31, 2008 - United Kingdom

Government defiance over a new tax on empty property, coming into force from 01 April, 2008 is being condemned by the country’s major retailers, office and warehouse owners. They believe it will harm communities and damage business.

In an unprecedented demonstration of anger, the BPF, BRC, BCA and commercial occupiers’ body CoreNet Global are telling ministers that the Government is ignoring the reality of the current economy and property market in their desperation to plug holes in the nation’s finances.

Today’s rule change will see full rates charged on empty properties, with the Government raking in an extra three billion pounds from businesses over the next three years.

The trade bodies, representing occupiers and owners, large and small, have written to Local Government Minister John Healey saying he is ignoring the basic business principle that a property owner needs to lease out their property in order to make their business work. Properties are empty because they are not wanted at that time or place and new tax burdens will not change this.

Similarly, cutting relief will reduce the flexibility of leases and cut choice for small businesses wanting to move to office or retail space that fits their changing needs. Regeneration projects will be rendered unviable because of the added costs, undermining Government aims and damaging communities.

Until today (Tuesday), no business rates were due for the first three months that shops and offices were empty. After that, 50 per cent of the normal rate had to be paid.

Under the new rules there will still be no charge for the first three months they are empty. After that time full rates must be paid even if a tenant has not been found. After six months factories and warehouses will lose, what was 100 per cent relief. Properties that have already been vacant for the three or six months at 1 April 2008 will immediately attract the full rate, as the tax is retrospective.

In their joint letter the trade bodies tell the Government that if it cannot prove its claims that the extra tax will increase property availability and reduce rents, it must reintroduce the 50 per cent relief or extend the period when no rates are due to better reflect the time taken to fill vacant property.

BRC Director General, Stephen Robertson, said: “The Government must take us for April Fools. It is ignoring the mechanics of the property market because of a desperate need to plug holes in the budget at a time when the economic slowdown makes it more likely business premises will fall vacant. In the current economic climate Government should be alleviating the tax burden on businesses, not making them less competitive.

“No one gains by keeping property empty. It’s unoccupied because there isn’t the demand for it at that time and place. Piling on taxes will not conjure up new tenants or drive down rents but will weaken the prospects for local regeneration.”

Liz Peace CBE, Chief Executive of the BPF, said: "This is a disastrous move that could have consequences far beyond the lifespan of this Government. Despite all the talk of open government, this ill-conceived move has been brought in without fair and proper consultation. There is a clear lack of joined up thinking between the Treasury and Communities departments, and ministers must understand the financial risks that private firms take to regenerate our towns and cities.

"Cutting rate relief will be a major blow for those striving to deliver sustainable communities. It's in no one's interests to leave property empty, but the realities of the current market mean that new developments will see a certain percentage of vacancies and it's unfair that those very investors prepared to deliver Government policies should be penalized and ultimately priced out of regenerating our country."

The Government claims the measure is being introduced to boost occupancy rates and encourage regeneration.

Industry says it will do the exact opposite by:

Putting developers off risky projects where property may take time to fill, undermining investment in deprived communities most in need of regeneration.

Discouraging refurbishment of obsolete property with owners unable to bear the cost of it standing vacant while work is done.

Conflicting with the, Government-backed, Leasing Code of Practice, meant to promote flexible leases.