Small businesses to suffer as Government slashes empty rates relief threshold

Small businesses to suffer as Government slashes empty rates relief threshold


In a move described as “damaging and retrograde” by the property industry, the government has announced that small properties will no longer be exempt from empty rates, in a bid to boost tax revenue.

It currently stands that properties with an estimated yearly rental income below £18,000 do not have to pay the empty rate levy – which taxes buildings empty for more than three months.

Last week the government announced that the coalition plans to cut the exemption threshold to just £2,600 in April 2011 – which they hope will boost tax revenues by £400 million.

This £400 million estimate is dramatically higher than the £135 million cost the previous government stated for the tax, perhaps indicating that the number of empty properties in Britain has rapidly increased.

Mike Peacock, head of ratings for King Sturge, said: “Frankly we were slightly surprised by the announcement by the government, considering this administration has promoted itself as a friend of the small business and it is those guys who are going to be most affected. This is contrary to what they said they were planning to do.

“There seems to have been a complete lack of imagination by the current government, we thought that maybe they could have gradually introduced empty property rates to smaller businesses rather than cutting the threshold immediately to just £2,600.”

Labour previously introduced the exemptions in 2008 – before the recession – when it axed the 50 per cent relief from business rates for owners of empty retail and office space and 100 per cent relief for warehouse and factory owners.

Although this was designed to encourage regeneration schemes it led to owners of empty properties demolishing buildings, rather than pay tax on them.

When the Conservative and Liberal Democrats were in opposition they criticised empty rates. But many firms believe that various companies and property investors could be negatively affected by this latest move.

Mr Peacock added: "I have a meeting with a client next week who is a landlord with a portfolio of £300 million worth of properties – most of them are start-up units in the midlands – but because these units are generally for small businesses they do tend to have a lot of empty property on their books. This increased RV will result in their liability going up by £1 million.

“This is a particularly special case, because of the fact that landlord provides property to small businesses to deprived parts of the country, but overnight they will be hit by this hefty sum, even though what may look like a modest increase in the public arena.

“There are several different way to look at it, but whichever way you do, small business are going to suffer.”

By Shelley DeBere

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