AM Online

Empty property rates to return

In what is likely to be his last budget speech as Chancellor of the Exchequer, Gordon Brown announced major changes to the rates affecting empty properties and alterations in capital allowances.

Though commercial property dwellers will not be affected until at least April 2008, it is important to be aware of how your business’s costs could increase as a result and what can be done.

Currently industrial spaces, such as workshops, which are unoccupied are exempt from paying rates, while a business property, such as a showroom, must pay half rates if it has been empty for three months or more.

Under the proposed changes, industrial property occupiers will be forced to pay full rates after an empty period of six months, while business properties will be liable to pay full rates after three months.

Alan Watson, head of rating at Rapleys, advises that dealers should act swiftly to avoid hefty costs. “This is more of an issue for people with leasehold property. They could be paying rent plus rates, while the building stands empty. It’s not so critical for dealers with freehold property as they have a choice. However, if someone is planning on redeveloping the land they own, I would advise to demolish the building as soon as possible.”

Watson also believes that the change in legislation could herald the return of ‘constructive vandalism’, last seen during the Thatcher reign. “People were tearing the roofs off their buildings to make them incapable of beneficial occupation, hence avoiding paying rates,” he explains.

It is still unclear whether these new regulations will run from the start date of the legislation, which is likely to be April 2008, or whether the qualification for the reduced relief will start from when the property first became vacant.

Meanwhile, capital tax allowances on industrial buildings are due to be phased out by 2011 (see AM issue April 6).

David Rees, head of motor retail at Davis Langdon, says: “The existing basis was a 25-year tax life with an annual 4% allowance on the whole structure. This will now drop by 1% each year from 2008 onwards effectively ending in 2011.

“The only good news is that apparently balancing adjustments ceased with effect from March 21, 2007, meaning no repayment on disposals.”

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