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Empty Rates tax 'paving the way for future instability'

Tuesday, 21 April 2009 9:52 AM

Empty rates could cause long term instability to the commercial property market according to a survey released today.

The Royal Institution of Chartered Surveyors (Rics) and Lambert Smith Hampton (LSH) Empty Property Rates (EPR) survey found property owners are increasingly turning to demolition to avoid paying the tax.

The research comes on the eve of the Budget, when a suspected £1 billion move by the chancellor to boost the housing market is expected tomorrow. Although stamp duty is likely to remain at its £175,000 threshold, there has been little mentioned of the EPR, which the British Property Federation (BPF) has named the "tax on hardship".

The survey is the first industry review of the tax since its controversial introduction a year ago, with 93 per cent of respondents claiming it was "exacerbating the financial difficulties".

Gillian Charlesworth, director of external affairs at Rics, said: "Although the government's motives for reducing EPR relief were well intentioned when initially introduced, it is clear that the recession has led to these rates having the opposite effect and causing more damage to a sector that is already suffering.

"This survey has finally produced the evidence-based facts to support the need for changes to be made to this hugely unpopular tax."

Some 85 per cent of those surveyed believed the 75 per cent increase in the demolition of perfectly sound buildings was to avoid paying the tax. The survey also found all sectors saw a decrease in investment in new properties, with the industrial sector being hardest hit.

Rics said as a consequence of the EPR there is likely to be a shortage of available commercial property once the economy turns around, and the tax would have a significantly negative impact on the ability of central and local government agencies to pursue property-led urban regeneration.

Ms Charlesworth added: "On the basis of these findings, we have urged the government to give serious consideration to increasing the EPR relief to 12 or even 18 months before full business rates across all non domestic properties become payable, or to remove, or significantly reduce, empty property rates across all non domestic property, in full consultation with the industry."

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