CFIp16-17_Empty rate.qxd 27/2/09 11:28 Page 26
16 | Empty rate tax
Taxing issues
Gary Bailey of Blemain Group reviews some of
the opportunities and pitfalls the recently
introduced empty rates tax could create for
commercial brokers
F
ollowing its introduction at Business rate hike an empty rates bill is to pay it; however the
the beginning of April 2008, In November 2008 the chancellor announced sums involved on a large commercial site can
the government's controversial that from April this year the tax threshold for easily run as high as six figures and many
tax on empty commercial empty rates would be raised to exclude prop- property owners will be unable to access this
properties was met with a vol- erties with a rateable value of under £15,000, amount of capital within the kind of
ley of opposition from several yet that same month also heralds the begin- timescales required. In cases such as this,
major trade bodies represent- ning of a new tax year and the biggest hike in brokers may be able to assist by arranging a
ing the interests of property developers, land- business rates since 1993. The planned 5 per bridging loan, the funds from which can be
lords, retailers and a variety of other cent increase, based on the RPI inflation fig- used to cover the tax bill. Short term finance
concerned professions. As we turn the corner ures from September 2008, will only add to has traditionally been used for covering a
into 2009 the deteriorating conditions in both the woes of property owners facing up to variety of taxation costs such as corporation
the commercial property sector and the hefty empty rates demands. Calls to abolish tax, and it is now being used to cover this new
broader economy mean that the "Empty Rates the tax altogether in acknowledgement of the expense too.
Tax" could become increasingly important current market conditions have so far fallen Unfortunately, not all property owners are
for finance brokers involved in the bridging on deaf ears. in a position to meet the increased demand
and commercial sectors. How does this affect the commercial on their finances that the empty rates tax rep-
The empty rates tax requires that commercial broker? There are several possible repercus- resents. Those that find themselves over-faced
property owners and landlords pay 100 per sions arising out of the empty rates tax that are opting for a second and more drastic
cent of the business rates on a property if it brokers might benefit from being aware of. solution to the tax - demolishing properties
has been unoccupied for more than 3 months Firstly, they should consider that property to avoid incurring an empty rates bill for
(6 months for certain kinds of industrial sites owners tend to be handling the tax in one of them. The fact that property owners are being
such as warehouses and factories). With the two ways. Both of these have the potential to forced into this position has been one of the
current commercial market survey from the require access to finance, and in the current principle causes of opposition to the tax, but
Royal Institute of Chartered Surveyors telling market environment it is highly likely that there may still be opportunities for brokers to
us that occupier demand is now declining at brokers will find themselves fielding enquiries assist those who have taken the decision to
the fastest rate since their records began, the from property owners whose banks say that knock down their properties. Again, they
empty rates tax is putting extra pressure on they are no longer able to assist them. may not be able to raise the capital required
commercial property owners who are already for such an undertaking within the timescales
faced with a struggle if they need to lease or Preferred response required. Bridging finance can once more be
sell their premises, exacerbating their troubles Assuming that their business is basically employed to enable them to proceed with a
in what for many is likely to be the most chal- robust then the preferred response for any demolition, although obviously in this situa-
lenging period they have ever faced. commercial property owner presented with tion the borrower must have other suitable
March 2009 Commercial finance Introducer www.mortgageintroducer.com
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