End of rates relief ‘won’t save £18m’

THE Scottish Government has rejected calls to change course on its plans to cancel empty property rates relief as experts warn it will fall far short of its expected £18 million annual contribution to Government coffers.

Peter Muir, a ratings expert with property agency Colliers, said Holyrood’s calculations on how much cancelling the relief on commercial property would bring in were “vague and woolly” and that the government didn’t have a “hope in hell” of raising the money.

Last week, Chancellor George Osborne pledged to review empty property rates legislation in England and Wales after it emerged the tax was doing more damage to the economy than it contributed to the exchequer.

Muir said that a rise in rates on empty commercial property would drive landlords, particularly in Scottish towns, to the brink of collapse.

Muir said: “They have no hope in hell of raising that. It will put substantial pressure on landlords to meet them; not the big institutional funds, but for the smaller landlords – it could well be that the banks decide there is no income and they foreclose. Then there will be nothing coming out of those landlords.”

He continued: “It will affect the areas that have already been hardest hit in the economic downturn. Tenants are going bust, new tenants are not getting finance to start up businesses, and in these towns there are already more unoccupied than occupied shops and offices.”

He warned the increased tax on empty properties, which was unveiled by finance minister John Swinney in November and due to come into force next April, risked causing another crash in property values, particularly in the most vulnerable areas of the country, such as the town centres of Ayr, Dumbarton, Falkirk and Stirling.

“It doesn’t exactly help the situation of anyone trying to rent the property. These landlords have to spend a significant amount of money to somehow turn around their units.

“Without any rents they won’t be able to do that unless they have some cash stashed away. To add another 40 per cent on their annual liability starts dipping into any cash they have got that could possibly be used to make the place more attractive,” said Muir.

Damning evidence submitted in recent weeks to a Holyrood committee reviewing the legislation found that as much as 30 to 40 per cent of the empty property relief would fall heavily on local authorities, the NHS, Scottish Enterprise and Highlands and Islands Enterprise.

A Scottish Government spokesperson said: “Our proposals on empty property relief are designed to provide every incentive to make sure that business rents are set at an appropriate level to encourage higher rates of occupancy and breath new life into our high streets.

“This will help companies become active in the economy and will create jobs.

“Even after reform, empty property relief in Scotland will be significantly more generous than that in England.”

Muir said: “The SNP expect landlords will lower rents as a result of removing the rate. But rents are already really low. It is a supply and demand issue – and for the first time in a squillion years there is no demand.”