NW industry unimpressed by empty rates change

The move by Chancellor Alistair Darling to remove buildings valued at less than £15,000 from empty rates from next April has disappointed property professionals across the region.

Adam Burke, director of rating in Atisreal's Manchester office, said: "The total burden of the tax to struggling property owners is not expected to be reduced materially by this change as there are also small businesses, particularly in the retail sector, who have single properties with rateable values above the temporary threshold and this offers no support to them whatsoever.

"Demolition of difficult to let stock will continue and speculative development in an extremely uncertain market made no more viable; changes which can only serve to limit supply and potentially increase rents – hardly consistent with one of the major factors originally driving these unwanted changes."

Keith Cooney, head of rating, Knight Frank, commented: "In reality the Chancellor has effectively snubbed the main property owners who are most affected by the empty rate tax. These property owners have in many cases been the key drivers for developing and regenerating large parts of the country over the past decade. Under the current climate the Government should be ensuring that these important economic drivers for the future are not brought down by this punitive tax."

Bill Chandler, commercial property partner at law firm Hill Dickinson, commented: "While in the current climate any relaxation of the new empty rates regime has to be welcomed, and there will undoubtedly be some winners, many in the property industry will quickly realise that they are still in a worse position on empty rates than they were this time last year.

"The Government has missed its big opportunity to get rid of a hugely unpopular move. Empty rates reform has been universally criticised, not just by the property industry but even within the Labour Party, and this was Alastair Darling's big chance to correct the position without losing too much face by blaming the change of policy on the extreme economic situation. But by making it clear in the PBR that this Government still believes in the principle of charging rates on empty properties, and that this is a strictly limited and temporary measure, the Government has firmly wedded itself to the policy and if it stays in power will find it difficult ever to go back without a huge loss of face."

Mark Rawstron, director of capital markets group at GVA Grimley's Manchester office, added: "This is a huge missed opportunity and shows how out of touch with reality this lot are. There is a growing body of hard evidence from both the public and the private sectors that the abolition of rates relief on empty properties is having exactly the opposite consequences intended by those who brought the Bill in. The direct consequences are reduced availability of cheap flexible space, demolished buildings, stalled regeneration, increased public subsidy and most outrageous of all insolvency of businesses purely because they have vacant space."

Mark Radford, head of Jones Lang LaSalle's rating team in the regions, agreed: "It will not help many companies and property investors throughout England and Wales whose vacant properties have a Rateable Value above £15,000; nor will the change help any vital regeneration or redevelopment schemes. This is particularly brought into sharp focus for ratepayers in the north of England whose neighbours across the border in Scotland do not face these punitive charges."

David Cownie, director of the professional team at CB Richard Ellis in the North West, said: "The government's attempts at easing the difficulties of the property industry have fallen well short of the level of relief the property sector was hoping for.

"The chancellor has bowed to growing pressure from the industry but its concessions will provide little relief to the majority of those affected by the Rating (Empty Properties) Act 2007.

"The Government are claiming that this will impact 70% of empty properties, but their own statistics indicate that it will only really hand back around 18% of the estimated £1bn that the Rating Empty Properties Act 2007 was expected to raise.

"This change will do little to ease the burden on struggling landlords; many will find this change adds further to the complexity of the business rates system."

The lack of help for the housing sector was also singled out for criticism.

Andy Finch, partner and head of residential sales at the Manchester office of property agents Knight Frank, said: "Once again many people involved in the UK housing industry have been left disappointed – but hardly surprised. This Pre-Budget Report proves that you should never believe the hype and not for the first time the government has failed to take any meaningful measures to shore up the housing market.

"The endless leaks led us to believe that there would be a raft of measures to assist an industry that is going through arguably the most difficult trading conditions in living memory, yet where is the extension of the stamp duty holiday, where is the legislation allowing housing associations to take over homes facing repossession so homeowners can remain in them as tenants and what has happened to the re-introduction of Miras?

"The Chancellor appears to have missed a massive opportunity to bring some much needed festive cheer to the housing market. It's possible that the devil will be in the detail and we may discover more over the next few days – but I for one won't be holding my breath."

The reduction in VAT from 17.5% to 15% from 1 December will also impact the property industry through stamp duty land tax calculations.

Chandler added: "The VAT reduction isn't designed to help the property market but will save some stamp duty land tax on those transactions which are still happening, since SDLT is of course assessed on VAT inclusive prices and rents. The effect of this is most pronounced where the VAT is sufficient to tip the chargeable consideration over a threshold so that tax is charged at a higher rate on the whole sum. When is anyone going to remove this "tax on tax" situation and make VAT truly neutral for VAT registered bodies?"

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