Our illustrious Government has not only managed to steer our economy on the home front into what could be the worst recession that this country has seen for 30 years, it has decided to hammer the prospects of future inward investment from foreign company’s by introducing the most crass and shambolic piece of legislation “seen in years as well.
Up until the 1st of April 2008 vacant industrial property received 100% Business Rate relief, where as all retail and office properties paid only 50%, after an initial three month exemption. As a result of this change, empty Business rate relief now costs owners and developers of office or shop premises double the amount previously, and owners of vacant industrial property who had not been required to pay any empty rates, now face a substantial rate liability.
The new rules for business rates for empty property was introduced will see reliefs limited to three months for offices and shops and six months for factories and workshops from 1 April 2008. After this period, full rates will be payable.
“So what” I hear you say?
Well here are some of the consequences of this seemingly inconspicuous change.
I sometimes am fortunate enough to act on behalf foreign companies who for some reason or another wish to open up a facility here in this country. Such inward investment has been encouraged by not only central government but local government as well. Local, Unitary, and County authorities have all been doing their bit to compete with, not only their foreign counterparts but their local counterparts as well. Inward investment departments / teams do all that they can to entice companies to their area by various means and financial inducements.
This has to be good for the economy, inward investment brings jobs, spin offs like infrastructure investment, re generation of derelict and defunct areas that have suffered through depravation and the lack of investment generally.
Wouldn’t you say that the job of a government is to encourage all of this rather than discourage investment? Particularly when an economy is heading for, if it’s not already in, a major down turn?
During the last 10 to 15 years we have seen a massive growth in the warehouse and industrial sectors of development. Large sheds have sprung up along major transport corridors encouraging a central hub and spoke distribution style of distribution of goods through out the country. Major office parks have been developed and encouraged by local planning departments to bring services and clean jobs to an area. A good example of this is the New York area of Tyne & Wear. Developers, working in conjunction with our pension funds have invested in these developments to bring these new working environments to us.
Then Mr Gordon Brown and his best mate Alistair Darling dream up this idea to tax the empty buildings by removing the reliefs from them. So “where is the inducement now chaps” “what is going to be the motivation of the developers and pension funds to invest in new areas of regeneration or industrial space etc WITHOUT A PROSPECTIVE OCCUPIER BEING SIGNED UP FROM DAY ONE!!!!”
Why would some one abroad look at coming here when they have to wait between 9 to 18 months to get into there new facility? They are going to have to wait at least that long for a planning permission and then building regulations approval then the contractors have to build the unit…..This is because once the existing stock of high quality warehouse and Industrial space has been taken up no one is going to risk the burden of paying “empty rates” on the finished product.
The consequences of this “Empty Business Rate” legislation is that no new buildings we be readily available, therefore the construction industry will suffer which will lead onto even more unemployment – er wont that increase the payments from Government to the unemployed?
The investment goes to elsewhere in the EU. Oh and I am sorry chaps (those of you in the inward investment departments) you are no longer needed either.
“Yes but according to the Government this change is supposed to be an incentive to make landlords reduce rents and make the market more flexible”
Trust me if you believe that then clearly you believe Gordon Brown will win the next election? That is pure “spin”
Michael Gillespie
I Have a 2,600 sq ft light industrial unit devided in two with planning permision for residential flats but know one wants to buy it, both my tenants have left , I now face a council tax bill of £650.00 a month & my our joint pension is £600.00 a month the unit was our pension now it’s a mill stone
Our company designs, manufactures and erects structural steel frames for all types of buildings. Factories, warehouses, shops, offices etc
Since the new rates tax on empty buildings the steelwork industry has suffered a dramatic fall off of orders far above that caused by the present recession.
Companies, pension funds and individual investors simply cannot afford to speck build without signing up an end client. It is a vicious circle and one that has caused great and lasting harm both to the construction industry but the development of UK Limited.
Does anyone know of anyone forming a fighting group agains this tax?
My business owns a field that years ago was a company sports running track but is now a field of crops. Upon receiving an empty business rates bill I appealed. Nothing happened. I took photographs of the field, the crops and a neighbouring school so it could be easily located and wrote saying this land is agricultural, it is not rateable. Nothing happened. I telephoned the appeal officer and was told that their local officer had been poached and that as they served 29 authorities there would be a delay while they recruited. I complained about having to continue to pay the bill when I could not find anyone to drive past and take on board the patently obvious.
As it happened I had another appeal from months earlier and a lady Valuation Officer agreed to also look at the field. She took the same pictures I did, saw my letter and agreed with me – it’s a field of crops and not rateable.
A month later I received a standard letter saying that as it has not been possible to agree with my “proposal” it would be the subject of a continuing Appeal. The average time to get to a tribunal is TWO YEARS.
I was told by the lady valuation officer that her boss hates taking anything out of the rating list. Unfortunately she was leaving the Valuation Office to go back to teaching primary school kids, so I have no real means of trying to arrange for the person who does the site visit to talk to the person who can make the decision.
This is an on-going problem as what is happening is that the person who makes the decision has insulated themselves from the business folk who are trying to make reasoned arguments.
I feel aggrieved that this is taxation without representation.
My wider point is that the idea of the removal of the exemption was to bring back idle “brown land” back into use to take the pressure off other sites and to lower rents. What has happened is that developers have choosen to get planning permission and then knock the building down. Our cities are looking like “broken teeth” – see the demolished building site along the A40 into London bearing the slogan “No Business Rates here Mr Brown” amongst the debris.
It takes a lot of energy to make a brick building, and SME’s often use them to economically run their businesses. Environmentally it does not make sense to knock them down unless they truly are at the end of their useful life. Sometimes people use the old argument that these buildings are not energy efficient anyway so should be pulled down. Actually most warehouse operations are not heated so it makes little difference, and if any businessmen didn’t realise the size of his utilities bill (seems unlikely) then the new energy certificates that will provide another on-cost for most businesses from October will make the position clear.
There is a great deal of disquiet from businesses that are struggling, the idea was to tax landlords and developers who may not have voted Labour anyway. I don’t believe it has turned out quite as the Government planned.
Reap as ye sew, Mr Brown (sorry to hark back to the field again)
I invested my pension into a SIPP fund to acquire land and build a 4,000 sq ft office building. It seemed a sensible decision bearing in mind poor pension fund performance. We secured two tenants but last year as the economic downturn hit, both organisations closed for business within months of each other and we are now faced with an empty rates bill at a time when business is really tough.
At the same time increasing rates on retail businesses is crippling the retail sector.
It makes you wonder if government want small businesses to fail?
Who can we lobby about this? Appealing individually to local council rates offices seems to achieve nothing and this is a wider issue for many many businesses.
been a successful engagement. The men and officers returning spoke
elavil
Many thanks!
To all those people moaning about the business rates now payable – there is something you can do about your empty property > GIVE INCENTIVES TO POTENTIAL TENANTS. Such as; 1. Rent free period of 3 / 6 / 9 / 12 months – take a deposit and quarter rent in advance payment then apply the rent free period – IN most cases the ingoing tenant will spend so much on fixtures / fittings that they will be want to continue on after a year (subject to their business performance). Time passes rather quickly and you will soon find that a year is over and rent shall begin.
I am a commercial letting agent and am fed up with seeing fatcats sit on property and not offer decent incentives that would a) create jobs and business b) create a revenue for Government. Dont forget incentives have got to be real and substantial, your property will soon stand out when you advertise 6 months rent free!
At the same time I do admit that this article does raise serious concerns such as inward investment, investors not building due to business rates / no tenants in recession.