Changes to business rates aimed at boosting the occupancy of retail premises will not ‘conjure up new tenants or drive down rents’ according to property experts.

The changes to business rates for empty properties announced by Gordon Brown in his last budget as Chancellor have now come into effect.

Until recently, no business rates were due for the first three months that shops and offices were empty, after that, 50% of the normal rate had to be paid. However, although there is still no charge for the first three months, after that full rates must be paid even if a tenant has not been found.

The Government believes these changes will improve tenancy figures and could even benefit retailers because it will reduce rents. They also claim it will encourage regeneration. “But they obviously haven’t quite realised how the retail property market works.” writes Retail Week. “So far, the property market has argued that empty property is unoccupied because there isn’t a demand at that time and place. Piling on taxes will not conjure up new tenants or drive down rents.”

There have been reports of landlords trying to exploit the tax loophole by taking roofs off or dismantling walls of their properties because the tax will not apply if the property is not fit to be occupied. However, though this would save the landlord money, the unsightly consequences of their actions would be borne by the community. Add to that the fact that few landlords are willing to let their properties at a lower rent and it’s difficult to see how the new tax will actually benefit anyone apart from the taxman.

April 18, 2008