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Government rejects calls to bring back empty property rates relief


The Government has no plans to reinstate tax relief on empty business premises despite lobbying from the property industry, it has said.

A Treasury spokesman said he "recognised problems" caused by the previous Government's reform of the system, but added that any changes had to be balanced against the costs involved.

"However, all taxes are kept under review and we will want to work constructively with the property industry on this inherited problem," he said.

Business rates are charged on most non-domestic premises including shops, offices, warehouses and factories. Premises are assigned a rateable value by HM Revenue and Customs, which is used by the local authority to calculate how much the occupier of the property should pay.

Property owners are exempt from paying business rates on an empty property for three months after the property becomes vacant. Buildings with a rateable value below £2,600 are exempt until they become occupied again, while buildings with a rateable value above this amount are liable for the full amount after the three month period has passed.

The £2,600 threshold came into force in April 2011. Industry bodies, the British Property Federation and the British Chambers of Commerce, both recently called for this threshold to be returned to the previous value of £18,000.

A previous 50% relief on rates for owners of empty buildings was stopped in 2008.

John Longworth, head of the British Chambers of Commerce, wrote to the Chancellor on Monday requesting that the threshold be increased.

"A single change to the Empty Property Rates regime could substantially bolster business confidence, particularly in areas where private sector activity is weak," he said in the letter.

The policy had led to "perverse consequences", including the demolition of usable business premises to avoid paying the rates, he said.

The British Property Federation last month called for signatures on an e-petition urging the government to reinstate the £18,000 threshold.

"Property is a fundamental driver of our economy and taxing empty space acts like a ball and chain as the industry searches for growth and economic recovery," Liz Peace, chief executive of the British Property Federation, said in a statement.

"The Government's ability to take action on these matters needs to be balanced against the high costs involved, the targeted support that has already been provided on business rates and the overriding need to reduce public expenditure and support the economy generally by reducing the deficit," said a Treasury spokesman. "In light of these, the Government has no immediate plans to reverse the reforms."

Tom Johnson, a property law expert at Pinsent Masons, the law firm behind Out-Law.com described the Treasury's position as "extremely disappointing".

"In the fragile post-recession UK economy, the absence of empty rates relief is a punitive measure that is stifling development as well as often forcing landlords to consider radical measures, such as demolition, to avoid the tax. Reversing this policy would be a simple and effective way to stimulate investment, and it is to be hoped the issue now gets air time in the Commons and is seriously considered," he said.

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