Business
Rate relief reform 'could stifle business'
12th May 2008
CHANGES in business rates relief that came into effect on April 1 could have a severe effect on business properties, according Newbury commercial property agents Dreweatt Neate.
Paul Richardson (pictured), of Dreweatt Neate Commercial, says that one of the last things Gordon Brown announced as Chancellor of the Exchequer brought in a full liability for business rates on many empty commercial properties after an exemption period.
Under present arrangements, industrial properties are exempt from business rates whilst retail and office premises incur 50 per cent of the due amount while they are empty, initially with three months relief for office and retail properties and six months for industrial and warehouse buildings.
After April 1, the reliefs will disappear following the initial exemption periods, leading to a potentially massive increase in rates liabilities for owners or companies that have relocated, leaving an empty building behind on which they still hold the lease or freehold. The new rules apply immediately to any properties that have already had their initial relief period.
"Developers who have built speculatively and companies that have relocated leaving empty buildings will now face an increase in their rates which could prove substantial," said Mr Richardson.
"A typical 5,000 sq ft warehouse which previously didn't incur rates when empty will see a rates bill of approximately £16,000. The threat of an overhead like this could well deter builders from starting schemes because of the costs they could face while buildings are in the throes of being let.
"Start-up businesses or those seeing rapid growth could also see their ambitions stifled because there will increasingly be a shortage of empty and available buildings on the commercial property market as this new system takes hold.
"The alterations to the way business rates are collected and the tax burden this will place on companies should not be underestimated. Similarly, commercial developers will now be more cautious in their approach to speculative new build which could lead to a stagnation of the market.
"At a time when our economy needs the freedom to grow the reverse effect could be imposed. There has been a great deal of focus on Alistair Darling's first budget and attention has slipped away from this potentially much greater threat to business.
"For industry to expand effectively, there has to be a certain amount of speculative building and a ‘bank' of empty stock that companies can move into quickly. The new rule also has the potential to discourage companies from buying older buildings that lie empty and taking time to refurbish them to bring them up to modern standards. This could lead to growing dereliction or demolition of buildings that were previously revived.
"Ultimately, this could drive down values for disposals and drive up rents as owners seek to recover their liabilities. None of this is good for sustained business growth."
Exemptions to the new rules that continue to apply are listed buildings, companies in receivership, buildings with a rateable value of less than £2,200, and properties occupied by charities or community amateur sports clubs.
For advice on how to mitigate business rates liability, contact Paul Richardson on (01635) 263036.
Paul Richardson (pictured), of Dreweatt Neate Commercial, says that one of the last things Gordon Brown announced as Chancellor of the Exchequer brought in a full liability for business rates on many empty commercial properties after an exemption period.
Under present arrangements, industrial properties are exempt from business rates whilst retail and office premises incur 50 per cent of the due amount while they are empty, initially with three months relief for office and retail properties and six months for industrial and warehouse buildings.
After April 1, the reliefs will disappear following the initial exemption periods, leading to a potentially massive increase in rates liabilities for owners or companies that have relocated, leaving an empty building behind on which they still hold the lease or freehold. The new rules apply immediately to any properties that have already had their initial relief period.
"Developers who have built speculatively and companies that have relocated leaving empty buildings will now face an increase in their rates which could prove substantial," said Mr Richardson.
"A typical 5,000 sq ft warehouse which previously didn't incur rates when empty will see a rates bill of approximately £16,000. The threat of an overhead like this could well deter builders from starting schemes because of the costs they could face while buildings are in the throes of being let.
"Start-up businesses or those seeing rapid growth could also see their ambitions stifled because there will increasingly be a shortage of empty and available buildings on the commercial property market as this new system takes hold.
"The alterations to the way business rates are collected and the tax burden this will place on companies should not be underestimated. Similarly, commercial developers will now be more cautious in their approach to speculative new build which could lead to a stagnation of the market.
"At a time when our economy needs the freedom to grow the reverse effect could be imposed. There has been a great deal of focus on Alistair Darling's first budget and attention has slipped away from this potentially much greater threat to business.
"For industry to expand effectively, there has to be a certain amount of speculative building and a ‘bank' of empty stock that companies can move into quickly. The new rule also has the potential to discourage companies from buying older buildings that lie empty and taking time to refurbish them to bring them up to modern standards. This could lead to growing dereliction or demolition of buildings that were previously revived.
"Ultimately, this could drive down values for disposals and drive up rents as owners seek to recover their liabilities. None of this is good for sustained business growth."
Exemptions to the new rules that continue to apply are listed buildings, companies in receivership, buildings with a rateable value of less than £2,200, and properties occupied by charities or community amateur sports clubs.
For advice on how to mitigate business rates liability, contact Paul Richardson on (01635) 263036.
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