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The return of de-roofing

A article in today’s (29 June ) Sunday Telegraph reports that growing evidence of the disastrous side effects of the removal of empty property rates relief on commercial buildings has led members of the Government to reveal privately they are already considering reintroducing the relief. The change in law, which Government estimated would yield an extra £1.4bn from the commercial property sector, has led to landlords demolishing buildings rather than pay the extra levy.

The article cites what is described as a well-placed source as saying that there are some people within Government that accept the situation is not as clear as the Treasury thought it would be. Ministers within both Treasury and Communities and Local Government have let it be known there may be scope for mediating or repealing the changes.

The article explains that the Government introduced the changes in April this year in an effort to force landlords to find tenants for empty buildings. By charging business rates on empty property, landlords would be forced to lower rents or refurbish their buildings, the Government had argued.The reality, however, was that property owners are tearing down buildings rather than pay the new levy, which can run to hundreds of thousands of pounds on large buildings.

The effects of the change in law have, the article claims, hit industrial property owners particularly hard. Steve Owen deputy chief executive of Brixton, one of the UK’s largest industrial property companies said: “The effect of this change is that it will take space out of the market. People who want to take space on short-term leases will have less choice and less choice means higher prices.” Owen said Brixton was already considering bringing forward the demolition of 300,000 sq ft of space that was not due to come down for another two to three years.

ANYONE FAMILIAR WITH THE CAMPAIGN’S ARGUMENTS will know that all of this was entirely predictable. In fact, precisely the same thing was happening in the early 1980s. And campaigners such as this organisation have repeatedly pointed out to the Government that if the property tax were to be levied on site values alone, on the assumption that the land was at its optimum permitted use, then this kind of tax avoidance would be impossible.

Do Government ministers just go ahead and ignore the advice Civil Servants give them or did the Civil Servants fail to forecast these obvious and predictable consequences? Either way, it is worrying to know that the British Goverment operates in this way.

Things could be different, however, with the new catch-all tax legislation that has recently been put in place. If buildings have been demolished prematurely solely for tax avoidance purposes, the owners could, arguably, still be liable for tax. It will be interesting to see if the authorities have the gumption to mount a challenge on these grounds.

See the full article in the Sunday Telegraph