10 Jul 2007 07:00 AM
Government moves to prevent deliberate dereliction of empty shops, offices and factories

COMMUNITIES AND LOCAL GOVERNMENT News Release (126) issued by The Government News Network on 9 July 2007

The Government's drive to revitalise our villages, towns and cities by bringing empty shops, offices and factories back into use continued today with publication of a consultation reviewing business rates for empty properties

Launched by Local Government Minister John Healey, the consultation seeks the views of property owners, developers, surveyors and councils on potential reform of detailed aspects of the empty property rates regime.

In particular, it will propose ways to tackle rate avoidance. Most property owners do not deliberately vandalise their empty property in a bid to avoid rates. However a small minority may be tempted to render it incapable of economic repair to avoid paying the rates by, for example, removing the roof.

It also examines the tax concessions for empty listed buildings like shops, offices and visitor attractions and whether their current exemption from the business rates can be justified.

Another area of concern is the current, possibly perverse, incentive whereby companies in liquidation are exempt from empty property rates while those in administration are not. Stakeholders have expressed fears this could encourage insolvencies with the subsequent loss of jobs and knock-on effect on supplier and creditor businesses.

John Healey said:
"The modernisation of empty property relief is a major element of a broad package of measures which promote the efficient use of land and property, announced in the 2007 Budget.

"We've already acted to provide a stronger incentive for owners to bring empty shops, offices, factories and warehouses back into use - helping to revitalise town centres, reduce rents for businesses and bring forward new opportunities for commercial and housing development on brown-field sites. The Rating (Empty Properties) Bill, has successfully completed its passage through Parliament and awaits Royal Assent.

"Now, as promised during the passage of the Bill, we are consulting fully on the issue of deliberate avoidance as well as inviting comment on exemptions for listed buildings and possible exemptions for properties owned by firms in administration"

Full details of the 'Modernising Empty Property Relief' consultation can be seen on the Communities and Local Government website at http://www.communities.gov.uk/index.asp?id=1511767

Notes to Editors
The Government is committed to promoting the efficient use of land and property. It is therefore taking action to modernise empty property relief from non-domestic rates to provide a positive incentive to bring vacant shops, offices, factories and warehouses back into use and to remove distortions in the efficient operation of commercial property markets.

Owners of empty non-domestic property have been liable for non-domestic rates since 1966. They currently qualify for significant relief from rates, receiving at minimum a 50% relief from the occupied business rate. Owners of empty industrial premises enjoy a complete exemption from rates. This regime was introduced in the 1980s during periods of economic recession and low demand for property and land. In 2007-08 this tax relief was worth a total of £1.38 billion in England alone.

The UK economy has enjoyed ten consecutive years of growth, with significant rises in land and property values. UK office rents are currently amongst the highest in the world and there is significant pressure on land for new housing and commercial developments. In these circumstances it does not make sense for other taxpayers to subsidise owners to keep properties empty.

That is why the Government announced reforms to empty property relief in the 2007 Budget, in response to recommendations made by Kate Barker in her independent Review of Land Use Planning and by Sir Michael Lyons in his independent Inquiry into Local Government.

Key aspects of the reforms announced in the Budget are being taken forward through primary legislation. A summary of the provisions in the Rating (Empty Properties) Bill is provided below.

This consultation paper seeks views on proposals for detailed reforms to be achieved through secondary legislation, in particular:

* possible changes to exemptions from empty property rates
* new measures to tackle avoidance of empty property rates

The Rating (Empty Properties) Bill
The Rating (Empty Properties) Bill was introduced into the House of Commons on 10 May 2007. Its key provisions, which relate to England and Wales:

* amend Part 3 of the Local Government Finance Act 1988 so as to increase the empty property rate from 50% to 100% of the basic occupied business rate. This will provide a strong incentive for owners to re-let, re-develop or sell empty non domestic buildings, reducing the need for new development on greenfield sites and increasing access to existing premises for businesses, so helping to reduce rents and increase the competitiveness of the UK.
* provide a zero rate for empty properties owned by charities, as announced by the Chancellor, and also for empty properties owned by community amateur sports clubs. This represents a significant boost to the support given by the Government to the voluntary and community sector.
* provide a new power to reduce the empty property rate from the new level of 100% of the basic occupied rate back to a minimum of 50% of the occupied rate. This will ensure that, in future, the Government has flexibility to respond to prevailing conditions in the property market.
* provide a new power to make regulations to tackle rate avoidance tactics by disregarding changes to the state of property in circumstances to be defined by regulations.
* provide for a number of minor consequential and technical amendments to existing primary and secondary legislation.

After its successful passage through the House of Commons and the House of Lords the Bill now awaits Royal Assent.

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