|BCSC has written an open letter to Julian Sturdy MP in which it outlines an alternative to empty property rates. The organisation, which represents a broad spectrum of the retail property industry, has campaigned against empty rates since their introduction in 2008, believing them to be a regressive and counter-productive form of taxation. In its letter the BCSC insists property owners and developers should not be penalised for their empty premises and instead advocates a variety of alternative measures including the implementation of business rate exemption zones in city centres.
Julian Sturdy MP was asked by the Chancellor to assess the impact of empty rates and identify potential reforms in March 2012.
Empty Property Rates: BCSC support for Review
Our organisation was very glad to hear that the Chancellor had asked you, and a number of colleagues including Marcus Jones MP who we know well, to look at proposals on how the empty rates regime could be reformed.
For background our position has always been that the regime as introduced in 2008 was going to achieve no more than add to the costs of ownership of property, and critically increase the risk, and therefore reduce the appetite, for speculative development. In addition we have also consistently made the point that the combination of reduced income from rent and additional taxation increases the likelihood that landlords will default on their loan agreements. Banks, including those where the Government has a significant interest, have been forced to take ownership of these assets, many of which have had equity wiped out, further increasing their exposure to high levels of debt.
As part of the Local Government Resource Review we recommended that the Government committed to assessing the impact of its policy on taxing empty property, and as such we are pleased the Chancellor has given you responsibility to do so.
In an effort to add constructively to the debate we, and others, have sought to identify alternatives to a full reintroduction of empty property rate relief. We have focussed our attention on the following model, and would be grateful for an opportunity to discuss this with you and colleagues as you undertake your review.
Business Rate Exemption Zones
There is of course the wider issue of the current business rates burden. Retailers already pay around £6 billion in business rates per annum. At a time of falling disposable incomes, low levels of bank lending and falling consumer confidence increasing business rates at 5.6%, as happened this year, is unsustainable. In addition retailers’ margins are under pressure due to the VAT increase in January last year and the impact of variable costs, such as wages and energy costs. As a result current operating costs for the UK retail sector, especially SMEs, are at one of their highest points proportionate to current annual turnover.
- In response to the Local Government Resource Review we proposed the establishment of business rate exemption zones in city centres where property owners and developers are committed to regeneration schemes, significant redevelopment or refurbishment.
- Our rationale is that there are circumstances where the taxing of vacant properties would inhibit otherwise desirable regeneration and development activity to occur, particularly for town centre development and on the high street due to the complicated and time consuming process of assembling sites even where ultimately backed by a Compulsory Purchase Order (CPO).
- Given the Government’s commitment to sustainable development activity we believe that property owners and developers should not be penalised for their requirement for vacant possession, which frequently gives rise to protracted letting voids prior to a start on site or demolition. Whilst it is possible for a developer or property owner to apply for a property to be de-listed we believe that the Government should amend current policy so that local authorities can identify properties for development in an allocated exemption zone and apply empty property rates to them. We believe this would be beneficial from an economic, environmental and social perspective, stimulating the active management of properties and encourage the redevelopment of obsolete premises into viable and required buildings.
- Naturally there would need to be safeguards against abuse but we see an overwhelming advantage in the promotion of desirable economic activity to reinvigorate towns and cities across the UK.