Businesses demolish empty properties to avoid tax

A government tax on empty business properties is causing mass demolition of commercial premises, according to the government’s own urban regeneration agencies.

John Nicholls, chair of a leaders group of the government’s 19 urban regeneration companies, said the Empty Rates tax was having a “very significant” effect on regeneration areas.

Nicholls spoke to Building after it emerged that the URCs leaders had written to the Treasury last year urging them not to introduce the tax, and predicting it would lead to unnecessary demolitions and damage development viability.

Nicholls said: “It seems to be having exactly the effect we predicted. The pre-emptive demolition isn’t actually the main problem. Most worrying is the fact it deters development and suppresses speculative building – which is just what regeneration areas need.”

Most worrying is the fact it deters development and suppresses speculative building – which is just what regeneration areas need

John Nicholls

Nicholls said the development industry needed to get together urgently to fight the tax and try to get the government to repeal the measure. “At the moment the evidence of the problems is largely anecdotal. The Treasury won’t back down from this without proper evidence, so we need to get this together fairly quickly.

Business rate relief on empty commercial property was removed on 1 April 2008. Before this, empty retail and office space received full relief for three months and 50% thereafter, while industrial space (warehouses and factories) received full relief permanently.

Since 1 April 2008, retail and office space pay full rates after three months’ grace. Industrial space is now charged full rates after six months’ grace. The government said it removed the empty rates relief to prevent landlords from leaving properties empty on purpose.

The British Property Federation has been fighting the tax, with which it says the Treasury expects to raise £1.3 billion.