Proposed Changes to Empty Property Relief

Gordon Brown’s decision to restrict empty property relief in his final budget speech as Chancellor of the Exchequer, he says, is an attempt to encourage reoccupation and redevelopment of vacant premises.  The aim is to provide an incentive for owners to bring vacant premises back into use to either re-use, re-let or re-develop them. 

At present, no business rates are payable for vacant industrial and warehouse premises and, after receiving full relief for the first 3 months, only 50% is payable for vacant offices and retail premises.

The Rating (Empty Properties) Act 2007 will drastically change the liability to pay business rates.  With effect from 1 April 2008, empty offices and retail premises receive full relief for the first 3 months but thereafter full rates will be payable.  Industrial and warehouse premises will receive full relief for the first 6 months and thereafter full rates will be payable. 

Furthermore, if you already have premises that are currently empty and you have or are receiving full relief, you will not receive a further 3 or 6 months’ relief as from 1 April 2008 but you will be liable to pay full business rates at the end of the relief period. 

There are some circumstances where relief will be available for businesses but you will need to proceed with caution as the Government has also introduced new Anti Avoidance Legislation but is still consulting on the detailed operation of it.  So if your property is not capable of occupation, for example, because it is in poor condition and cannot be economically repaired, your valuation officer may take a view that the property should be taken out of the rating list altogether. Please be aware that under the new anti-avoidance legislation if the property is damaged in order to avoid paying rates, then your valuation officer will have to disregard the change in the property’s state when assessing its rateable value. For example, if the roof is removed from an empty property for the purposes of avoiding rates, it may be valued as if the roof had not been removed and rates will still be payable.

Charities and community amateur social clubs, will as from 1 April 2008, pay no business rates provided that the property is mainly used for charitable purposes and the club is a registered club under the Finance Act 2002.  Listed Buildings will continue to be exempt from business rates whilst they are empty.

The Government feels that the reforms will enhance the supply of commercial property available to new and existing businesses and therefore reduce rent levels which burden the competitiveness in the UK.  However, the actual impact on your business will, in the short term, be more painful to your pocket.  Also, these provisions were devised when the property market was buoyant and we will now just have to see how they work out in a different climate.

If you would like any help or further advice then please contact Shamim Hussain or the Commercial Property team at Raworths.