Tax on empty properties crippling the recovery agenda28th November 2012

    
Over 90 percent of surveyors believe that charges placed on shops and offices are 'significantly detrimental' to the recovery of the nation's town centres. Over half also believe that charges are even a contributory factor in property owners demolishing their premises, according to a new survey from RICS.

When commercial premises, such as a shop or an office, become vacant the owner is not required to pay business rates for three months. For industrials and warehouses the rates holiday is six months. However, after this period, these charges - known as Empty Property Rates (EPR) - are applicable at the full rate, leaving many with a tax bill which they have no means of funding.

Worryingly, with industry still suffering, over two thirds (68 per cent) of respondents claimed that commercial property floor space is currently vacant for periods of over six months, meaning that the problem of unmanageable taxes is widespread at a time when businesses are most stretched.

Business rates collected from ratepayers are initially passed to central government and then redistributed back to local authorities as part of the Local Government Finance Settlement. These funds then contribute towards financing local services.

With the situation continuing to impact so significantly on towns across England and Wales, the knock on effect is also being felt in capital values. 75 per cent of respondents believe that the rental value of retail premises will decrease as a direct result of EPR.

RICS would like to see to see changes made in the government's forthcoming Autumn Statement by way of an extended exemption period for commercial property owners. This would mean that should a retail property owner lose their tenant, no charges would be applicable for six, rather than three, months. This would be extended to 12 months for owners of harder to let property, such as offices and industrial units.

Simon Rubinsohn, RICS Chief Economist, said: "The charges faced by property owners are quite simply crippling the high street and preventing businesses of all types from achieving financial stability. It is clear that in this difficult economic climate, businesses need all the help they can get.

"We would like to see the government take the initiative in the forthcoming Autumn Statement and offer property owners a longer exemption period. This would allow commercial landlords some much needed breathing space and contribute towards getting the business sector moving again."

Additional findings from the RICS research report
89 per cent of respondents believe EPR restricts economic growth
88 per cent considered EPR a significant deterrent for speculative building
87 per cent believe EPR has had a negative effect on investment across all sectors
84 per cent support extending the current rate free period
82 per cent support a 12 month exemption for new build