Property industry attacks Government's planned empty rates relief

In its response to a consultation on the proposals, the professional body said that the new relief would have "little or no impact" unless it was extended to include buildings that had recently been redeveloped or refurbished, as well as newly built properties.

"The relief is so limited and needlessly complex that it almost appears designed not to be used at all," said Liz Peace, BPF chief executive. "That the Government has dreamt up a new definition for a building just to implement this policy is a case in point."

"It will certainly do next to nothing to stimulate development. If Government is serious about boosting construction activity then the renovation or refurbishment of existing buildings must also qualify for relief. This is an economically-productive activity that should be encouraged, not penalised through the tax system," she said.

Announced in last year's Autumn Statement, the new relief is intended to encourage speculative development by reducing the business rates liability of owners of unoccupied new buildings. The relief is intended to apply to properties completed between 1 October 2013 and 30 September 2016 that are left lying empty, during the first 18 months after construction.

Business rates are charged on most non-domestic properties including shops, warehouses and factories and make up the third biggest outgoing for small businesses after rent and staff costs. Premises are assigned a rateable value by the Valuation Office, which is then used by the local authority to calculate how much the occupier of that property should pay.

Owners of commercial properties, such as shops and offices, are exempt from paying business rates on empty property for three months after the property becomes vacant. Buildings with a rateable value below £2,600 remain exempt until they become occupied again, while buildings with a rateable value above this amount are liable for full rates after the exemption period has passed. This threshold, which was previously set at £18,000, came into force in April 2011.

Setting out the nature of the new relief in April's consultation, the Government said that it did not plan to change the rules on when a property becomes liable for empty property rates. It instead intends to reimburse local authorities that use their discretionary powers to provide relief from business rates in specified circumstances.

The relief is intended to apply to unoccupied non-domestic properties that are "wholly or mainly comprised of qualifying new structures". It is not intended to capture refurbished properties, but will more than likely apply to those built on existing foundations or around a retained facade. The building will be considered "completed" for the purposes of the relief either on the date that it becomes ready for occupation for the purpose it was constructed or the date on which a completion notice is served.

To prevent the application of EU state aid rules, which prevent national or local governments providing advantages or incentives to certain commercial companies, ratepayers will not be entitled to relief worth more than the 'de minimis' limit over a three-year period. This limit is currently set at around €200,000, and authorities would need to administer the relief in such a way as to ensure that this limit is complied with.

Commercial property expert Suzanne Gill of Pinsent Masons, the law firm behind Out-Law.com, said that although the proposals were "better than nothing" they were not going to "fix the malaise on the high streets or prompt lots of construction work".

"If the Government wants the scheme to benefit small developers it will need to make it simple to use – this adds little more than red tape," she said.