Property tax is crippling economy says report

Charges placed on empty shops and commercial properties are severely hindering the region’s economic recovery, a new report claims.

Almost 90% of surveyors in the north of England believe that charges placed on shops and offices are significantly undermining the region’s economic recovery, according to a new survey from RICS.

When commercial premises, such as a shop or an office, become vacant the owner is not required to pay business rates for three months.

However, after this period, these charges – known as Empty Property Rates (EPR) – are applicable at the full rate, leaving many with a tax bill which they have no means of funding.

Nationally over two thirds (68%) of respondents across England and Wales claimed that commercial property floor space is currently vacant for periods of over six months, meaning that the problem of unmanageable taxes is widespread at a time when businesses are most stretched.

Business rates collected from ratepayers are initially acquired by central government and then redistributed back to local authorities as part of the Local Government Finance Settlement. These funds then contribute towards financing local services.

With the situation continuing to impact so significantly on towns across the north of England, the knock on effect is also being felt in capital values. 80% of respondents believe that the price of retail premises will decrease as a direct result of EPR.

RICS said that it would like to see to see changes made in the government's forthcoming Autumn Statement by way of an extended exemption period for commercial property owners. This would mean that should a retail property owner lose their tenant, no charges would be applicable for six, rather than three, months. This would be extended to twelve months for owners of harder to let property, such as offices and industrial units.

“The charges faced by property owners are quite simply crippling the high street and preventing businesses of all types from achieving financial stability. It is clear that in this difficult economic climate, businesses need all the help they can get,” said Simon Rubinsohn, RICS chief economist.

“We would like to see the government take the initiative in the forthcoming Autumn Statement and offer property owners a longer exemption period. This would allow commercial landlords some much needed breathing space and contribute towards getting the business sector moving again,” he added.

The research report also found that 89% of respondents believe EPR restricts economic growth, 88% considered EPR a significant deterrent for speculative building, 87% believe EPR has had a negative effect on investment across all sectors, 84% support extending the current rate free period and 82% support a 12 month exemption for new build.