Out-Law News 2 min. read
14 Jun 2013, 9:31 am
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.
Property law expert Stuart McCann of Pinsent Masons, the law firm behind Out-Law.com, said that the proposed policy would likely be seen as a "tentative step in the right direction" by the commercial property industry.
"However, expect calls for a longer exemption period being needed to really stimulate speculative development because the risk for developers of empty property rates liability will remain high," he said.
"If the policy is introduced as currently planned it will probably only have a material effect on smaller developments, because the viability of larger developments will still depend primarily on the key factors of confidence and finance," he said.
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 an empty property for three months after the property becomes vacant. Industrial properties, including factories and warehouses, are exempt for six months after becoming 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.
According to the consultation, the Government will not 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 the circumstances set out in the consultation.
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 dates remain the same as proposed in the Autumn Statement, and the building will be considered "completed" 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. The limit is currently set at €200,000. Authorities will need to administer the relief in such a way as to ensure that these rules are complied with, the consultation said.
The Government said that its proposals would "help stimulate construction".
"Construction decisions take into account the risk of paying empty property rates on newly-built commercial property if the property does not become fully occupied straight away," it said in the consultation. "Reducing this risk may incentivise some commercial property projects to go ahead that wouldn't otherwise, helping to stimulate the construction industry."
