At the time, ministers believed that such a move would penalise lazy landlords, while earning the Exchequer a tidy sum in Empty Property Rate (EPR) tax revenues. This legislation was always bound to fail to achieve its stated aims, and risked opening a running sore between the Treasury and commercial property landlords.
Five years on, premises lie empty
Now, five years on, when we are trying to recover from a double-dip recession, the EPR legislation has fractured the relationship between the commercial property sector and the government. With an estimated 15-20% of retail units lying empty and some 24% of all office space currently vacant, only the Treasury is benefitting. Landlords are paying the price of recession.
The value of empty property receipts for the Treasury remains a closely guarded secret in Whitehall, and for good reason. By now it will have reached embarrassing proportions, having bitten the hand of the state itself to the tune of £50m per annum for empty council property in England alone. Aspirational property developers and investors remain fearful of large empty property tax bills and so are delaying or shelving projects at an alarming rate.
Too little, too late
The Chancellor’s task force on EPR is to be welcomed. However, its conclusions are likely to be too little, too late. The volume of empty property is now so high, the EPR tax grab so large and the problems of our economy so great, that any nuanced relaxation of the EPR rules will be met with industry-wide derision. In his Autumn Statement, the Chancellor has the opportunity to once again help the commercial property sector. He should rescind the EPR legislation in its entirety.
This article is part of the autumn 2012 edition of Rating in Brief. You can read the articles online or download a PDF.