Tax on distress

This is not the first time vacant rates relief has been cut with the aim of getting properties occupied; most recently this was done south of the Border in 2008.

In this situation it was found that some local authorities and property owners actually demolished buildings rather than pay the full rates because the properties could not be let – through no fault of their own – and on top of this, the expected increase in tax revenues did not materialise.

There’s no reason why things should be any different in Scotland. Furthermore, there is a general feeling that non-domestic rates are often too high after the most recent revaluation in 2010.

Just last week, household names such as the Bank of Scotland, The Body Shop, Santander and Superdrug were among dozens of firms announcing they were going to court to get their rent rates reduced.

As such, the move to reduce vacant rates relief means landlords will have the double whammy of paying rates which are too high and a greater percentage of them – and all of this at a time when revenue is at its lowest because the property is vacant.

This has quite legitimately been branded a “tax on distress”.

Some might argue that commercial property owners are, on the whole, wealthy individuals and businesses who can afford this additional tax burden, and it is perhaps this attitude which makes the taxing of the commercial property sector a relatively painless exercise politically.

However, it should be remembered that pension and investment funds are significant players in commercial property and as such this issue is one that affects us all.

Donald Simpson

Cowiesburn Asset Management

Angle Park Terrace

Edinburgh