Chancellor To Curb Empty Property Tax Relief


The chancellor has said that he aims to reduce empty property relief in an attempt to address the problem of short supply.

Gordon Brown presented the idea in his Budget, announced earlier this week.

The proposals stem from data collected from the Barker Review and the Lyons Report, and fall in line with representations from the Federation of Small Businesses.

He said that "commercial property lying empty should not continue to be given generous business rate relief, particularly because this leads to higher rents in areas with highest demand".

In his speech to the Commons, he added: "So to encourage better use of commercial premises I will restrict the relief available for empty industrial properties to six months and for empty offices and retail to three months. There will be special exemptions for charities."

Some commentators have agreed with the chancellor's analysis that the measure will increase market supply.

In his Budget report, he said that a downward pressure on rents "will have significant benefits for UK businesses" and for new starters in particular.

However, Citywire reports some commentators have expressed concerns that tax increases would minimise returns for commercial property investors.

Chris Laxton, head of external funds for Morley Fund Management, commented: "From an investor's perspective any increase in council tax is likely to have a marginal impact on returns as the tax is paid by the occupier. Because this would be another cost to the occupier, it would ultimately not be helpful."

Angus McIntosh, partner at property investor King Sturge, was more vituperative in his reaction to the proposals.

He said that he believes that there has been "no market evidence that properties are deliberately left empty and by being empty push up rent levels".

As a consequence, he described the proposals as "yet another unwelcome stealth tax on the property market".

Mr McIntosh added: "Yet again the chancellor has increased the tax take from the property sector. This stealth tax is bad for GB Ltd - at a time when stock markets around the world are not delivering reliable returns, increasingly Joe [and] ... Joanna Public are depending on pension funds to invest in property. A property tax is a tax on their pension funds."

Meanwhile, Reuters reports that industry figures have welcomed government plans to lower the tax disadvantages of onshore and unlisted property investment vehicles relative to real estate investment trusts (Reits).

Gerry Ferguson, head of UK Property fund management at Scottish Widows Investment Partnership, said that proposals for a new elective regime over authorised investment funds could create "a level playing field" for taxing income between regulated property finds and Reits.