Property sector hit by tax changes
Monday, 7 July 2008
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A substantial increase in the number of commercial properties standing open will result in a significant tax windfall for the Treasury thanks to new rules introduced this year, leading accountants are warning.
Owners of commercial property that is not occupied or let out have, from 1 April, been unable to claim relief on business rates once the building has stood empty for more than three months, or six months in the case of industrial premises.
When it announced the tax change last July, the Government estimated that it would increase business rate revenue by £950m a year. However, a 15 per cent increase in the number of empty buildings since last summer means the actual tax take is likely to £1.1bn this year according to NB Real Estate, the property consultancy.
Some sectors of the property industry have been hit particularly hard by declining demand for premises as the economy has slowed. Around 12.8 per cent of all commercial property currently stands empty, up from 10.4 per cent last year. However, the number of empty offices has risen from 10.4 per cent to 15.5 per cent of the available space. Empty retail units are up from 9.7 per cent to 11.5 per cent.
The change to the rules was justified on the grounds that it would encourage landlords to ensure properties were developed and regenerated. But the property sector argues that in the current business environment, higher taxes on empty buildings are a brake, not a stimulus, on regeneration.
