Part of the consultation focuses on Temporary Occupation (or intermittent occupation) and whether Government should legislate, making intermittent occupations unattractive to landlords. Presently where a property falls vacant the ratepayer is entitled to a holiday from empty rates, during which no rates are payable. The period of void is typically 3 months, with industrial property being exempt for six months. Once the void period is exhausted full rates are payable and once any lease has expired the liability reverts to the owner. However, the exemption period (three or six months) can be reset if a property is re-occupied for a new continuous period of at least six weeks.

Many investors and developers with vacant commercial property will look at ways to reduce the tax burden by either reoccupying the property themselves or letting the property short term on favourable terms to a third party to reset their void entitlement. Full rates are payable for the period of occupation with a new void entitlement after the six weeks occupation period.

A number of proposed options for amending the legislation have been tabled as follows:

• extending the required occupation period from 6 weeks to 6 months
• placing a limit on the number of times a property can benefit from empty relief in a given period (for instance one period of empty relief each rates year)
• adding additional conditions to the meaning of occupation purely for the purposes of determining whether a property should benefit from a further rate free period (such as requiring that over 50% of the floor area is occupied)

In Scotland and Wales the legislation has already been amended so that a 6 month period of occupation is required before ratepayers are able to claim a new void. The Local Government Association argues that ‘contrived occupation’ is the most frequent cause of business rates avoidance and costs Local Government around £250 million per year, which amounts to circa 1% of annual business rates revenue.

These proposed reforms will be of significant concern to many property owners who at one time or another will likely experience some property vacancy. The consultation seems to miss the key point that property owners generally don’t want vacant property. Part of the Government justification for charging full empty rates has been that it is “increasing incentives for property that is empty to be either re-let or for the property and site to be re-developed”. However, the concern is that these proposed changes risk the opposite and could actually restrict investment and redevelopment and reduce the supply of affordable space for startup businesses or short-term seasonal lettings.

ForeView responded to the consultation highlighting some of our concerns over any proposed reforms.