Michael Rabbett, Commercial Property specialist at Buckles Solicitors LLP, analyses the impact of the Government’s changes to Business Rates.
Commercial Property owners should be careful not to be caught out by the Government’s introduction of new Business Rate legislation from 1st April 2008.
COMMERCIAL PROPERTY OWNERS WARNED OF BUSINESS RATE CHANGES
The changes to Business Rates were announced by the Chancellor as part of the 2007 Budget and affect all vacant commercial properties. The stated aim of the new legislation is to provide a strong incentive to bringing vacant property back into use. However, with an expected income of around £950 million from the withdrawal of some current reliefs, it is difficult not to infer an element of revenue generation from the new Act.
The Government hopes that by penalising owners of empty property there will be an increase in the supply of premises to let and a reduction in business costs. This should also lead to a greater prevalence in the availability of Brownfield sites for re-development thereby reducing the development of environmentally valuable Greenfield areas. On the other hand, the new legislation is likely to hit property owners trading on the margins of profitability (eg; those owning properties in secondary and fringe locations) the hardest.
Currently most empty properties receive 100% relief from Business Rates for the first 3 months of vacancy and 50% relief thereafter, although empty factories, warehouses and listed buildings receive 100% relief at all times.
The new legislation (Rating Empty Properties Act 2007) will establish several new principals and others are due to follow in secondary (or “Enabling”) legislation. The main changes are as follows:
• Relief from rates will be limited to 3 months for offices and shops and six months for industrial properties
• Once the relief period has expired full rates will be payable on all classes of commercial property
• Permanent exemption from Business Rates is abolished for empty properties across the board
• Property owned by a charity and used for charitable purposes and registered under the Finance Act 2002 will be exempt
• There will also be an exemption for any property with a low rateable value as evidenced by rental income of less than £2200 per year.
Crucially, the time period is already running, meaning that any industrial property that has been empty for 6 months (or office that has been empty for 3 months) by 1 April 2008 will be immediately liable to pay full business rates.
Considering the significant rise in land and property values, the Government clearly feels under pressure to strongly encourage commercial property owners to get empty properties back on the rental market and reoccupied. However, the possible negative impact of such a policy upon both Tenants and property owners should not be dismissed.
For more information on this story or any other Commercial Property matter, please contact Michael Rabbett at Buckles Solicitors LLP Peterborough office on 01733 888807 or email at michael.rabbett@buckles-law.co.uk