Whilst many people within the property sector may be breathing a sigh of relief at the sign of the Government’s latest U-Turn in proposals for the Planning Gain Supplement (PGS), another stealth tax looks set to hit the industry.

The extensive lobbying that took place within the industry and public sector against proposals for PGS appears to have achieved some success and, as head of Cobbetts’ commercial property team in Birmingham, Eleanor Deady points out, the industry needs to be prepared to join forces again to lobby against another method to extract money from the property sector.

“The Government’s rationale for the proposed changes to Empty Property Relief (EPR) is to create a more ready supply of property, encourage more efficient use and achieve lower rents for businesses,” Eleanor explains.

“In the last budget, Gordon Brown set out his intentions to raise approximately £1billion by restricting EPR from business rates and, as Prime Minister, this looks to be something that he is keen to follow through.

“The Rating (Empty Properties) Bill passed its second reading in the House of Lords on the 26 June and had its third reading in early July. Despite the fact that there has been no further debate, many people within the industry are dubious as to the positive effects this proposal will have.”

The proposed reforms will mean that EPR will be reduced to three months at 100% for most properties (formerly 100% relief applied for three months and then 50% thereafter). On the other hand, it is proposed that industrial and warehouse properties secure full relief for the first six months, but after that full rates will be payable. Separate reliefs will apply for charities and community amateur sports clubs.

“In reaction to this change, owners would need to undertake some creative tax planning and there is concern that many would deliberately damage their buildings so that they would be entitled to dilapidation relief, which neither benefits the community or the market,” Eleanor adds.

“It is also expected that there will be an increase in the number of rating appeals and valuation tribunal cases challenging rental values for redundant buildings, as well as a hike in service charges as owners re-coup their losses. All of this is highly likely to adversely affect development activity and one has also to consider whether this is yet another swipe at the pension funds.

“The hope of a victory for the property industry over PGS proposals, which now looks promising, shows what can be achieved when the industry gets together and lobbies effectively against such crippling legislation and this is something we need to do more often.

“Despite such policies being met with adverse opinion within the marketplace, we often do not make enough noise about such proposals. And with something as serious as EPR on the horizon, the industry needs to be gearing up to do just that, to protect investment, development and the property industry generally.”

For further information contact:
Eleanor Deady
Tel: 0845 404 2487
eleanor.deady@cobbetts.com