Empty rate relief dramatically cut on small properties

THE rate relief for small empty properties has been dropped dramatically in a move expected to cost businesses £400m a year.

Former Labour Chancellor Alistair Darling extended the relief from empty business property rates for a further 12 months last December, meaning that properties with a rateable value of below £18,000 were exempt from paying tax on vacant commercial properties.

Communities minister Bob Neill announced this week the threshold would drop down to £2,600 from April 1, estimating that to continue with the exemption would cost government £400m a year.

Ian Stringer, regional senior director of consultancy GVA Grimley in Birmingham, said: “The original void rate legislation is a classic example of the Government misunderstanding the fundamentals of commercial property occupation.

“Nobody, whether an operational business or property investor, wants to see their property empty, and to suggest that a 100% void rates tax will incentivise owners and occupiers to let void space more quickly is a nonsense.

“To then subject smaller businesses and hence smaller occupiers to the same tax, just fundamentally misunderstands the real drivers for tax generative wealth creation.”

The announcement comes despite previous heavy criticism of the tax from communities secretary Eric Pickles and business secretary Vince Cable while they were in opposition.

The legislation, introduced by the Labour Government in 2008, has been slammed by property owners, with reports of firms knocking buildings down to avoid the charge being made.

It has also been criticised as hindering speculative development.

Liz Peace, chief executive at the British Property Federation, added: “If the Government is pinning its hopes on a private sector led economic recovery, then this is a damaging and retrograde step.

“The majority of the properties affected by this announcement will be in areas that are already economically disadvantaged, and so this will be a further blow.”