Bringing the house down?

The Governments recent move to scrap rate relief on empty industrial property could tempt some landlords to demolish empty warehouse facilities and other industrial property as a way of avoiding paying the substantial amounts of tax that unoccupied sites now incur.

The United Kingdom Warehousing Association (UKWA) believes that the Governments recent move to scrap rate relief on empty industrial property could tempt some landlords to demolish empty warehouse facilities and other industrial property as a way of avoiding paying the substantial amounts of tax that unoccupied sites now incur following changes to the Empty Property Rate Rules,

The Empty Property Rate Rules came into effect on 1st April this year and changed the tax position of empty warehouses substantially. Empty warehouses are now liable after a six month holiday for empty property rates at the same rate as they would pay if they were occupied and, as Roger Williams, chief executive officer of UKWA the trade association for the third party logistics industry. explains, a number of recent reports tell of property owners demolishing empty buildings to avoid the tax.

Industrial landlord, O&H Q7, has, apparently, started demolishing a fifth of a business park in Sunderland and is said to be planning to demolish a further 37,000ft of the 750,000ft park following the introduction of the rate changes, he says.  Meanwhile, storage company Vanguard Holdings has knocked down an empty pub it owned in west London to make a stand against the empty property tax hike. After the pub was reduced to rubble, Vanguard hoisted a sign over the remains of the building that said: Sorry Mr Brown no empty rates on this one, he adds.

The UKWA is keen to hear from any industrial property owners whose business has been affected by the new regulations. Roger Williams comments: We have heard lots of anecdotal evidence from our members of property owners demolishing empty property to avoid the tax.  However, it is very important that UKWA is furnished with facts about precisely how the change in regulations is actually affecting your company and I would welcome feedback from all parties so that UKWA can lobby parliament on this issue.

Labour MP for Halifax, Linda Riordan, has received the support of 35 MPs for the tabling of an early day motion to reintroduce empty property tax relief, as given in the Rating (Empty Properties) Act 2007.

However, says Roger Williams,  this EDM (like most of them), is unlikely to be debated.  Its purpose is rather to publicise the issue, and to demonstrate the extent of parliamentary support for a particular cause.

UKWA estimates that on a typical empty 10,000 square metre warehouse, the potential rates bill could reach 1/4m each year.

 Ministers justified this new tax on the grounds that these reforms will provide an incentive for owners to re-use, re-let or re-develop their empty properties and will increase the supply of commercial property available to new and existing businesses, thereby helping to reduce rent levels which burden the competitiveness of the UK, says Roger Williams.

The government considers that the reforms will provide a strong incentive for owners to bring empty shops, offices and warehouse buildings back into use, and so improve access to property and reduce rents for businesses - but one doesnt have to be too cynical to view this as simply another tax raising move.