A major group of property-owning British companies have joined forces with the property industry in an effort to convince the UK government to reinstate tax relief on empty properties.
In an open letter to Prime Minister Gordon Brown, household names including B&Q, British Airways, Next and Legal & General and property developers such as Brixton, Canary Wharf and Land Securities warned that the tax on empty property is having a "crippling effect" on the UK economy, particularly in the already hard-pressed retailing and manufacturing sectors.
Liz Peace, chief executive of the British Property Federation, which is leading the campaign, said: “It’s like making the unemployed pay income tax. Taxing hardship and business failure is a ludicrous way to help people through the hard times. Brown must act now to undo this mess.”
Supermarket chain Asda, which has admitted flattening a call centre to avoid empty rates, said: "Just as things have become more difficult economically, the government has imposed an ill-timed tax on empty properties which has had a number of unintended consequences.”
John Nicholls, chairman of the government-funded urban regeneration companies (URCs) chief executives group and one of the government's most senior advisors on regeneration has already warned that the tax is starting to affect the supply of much needed new property and job-generating property in urban areas.
Before the changes, vacant offices and shops received rate relief of 50% and industrial units gained full relief. However, all unused commercial properties now have to pay full business rates after a three-month period of grace for commercial premises and six months for industrial property and warehouses, adding about GBP1.3bn a year to government coffers.
The property-owning companies are calling on the government to reinstate the empty rate relief that existed before April 1, 2008 so that: all unoccupied properties receive full relief for the first 3 months; shops and offices pay 50% subsequently; and industrial premises receive full relief indefinitely.
Segro, the property development company, has said that the tax has cost it about GBP2 million to date, while Brixton, Segro’s main rival, has paid GBP1.5million in additional taxation. Almost 20% of Brixton's GBP2.2 billion property portfolio is vacant.
Steven Owen, deputy chief executive, Brixton plc said: "At a time when business is struggling in a severe economic downturn, imposing this 'tax on hardship' is entirely counter-productive and will endanger jobs. The detrimental effects of this tax burden need to be addressed immediately before it continues to damage the productivity of business, deter inward investment from overseas and act as a disincentive to regeneration.”
The government has no plans to reinstate the empty property relief, but is supposedly "reviewing" the legislation.
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