HOW COUNCILS RAKE IN £40 MILLION FROM ‘TAX ON DISTRESS’

Scotland’s councils are reaping a £40 million ‘tax on distress’ with record amounts being levied on empty business premises. And the figure is set to rise sharply as the Scottish government’s cut in empty property rates relief takes effect from this month.

The income raked in by Scottish councils on empty commercial properties in 2011-2012 climbed to £39.9 million, a rise of 10 per cent since the economy was struck by the financial crisis in 2008-09.

Councils say the levy is intended to curb the spread of empty or derelict commercial premises in our town and city centres and act as a spur to encourage owners to find tenants.

But owners have had to battle with the continuing flat-lining of the economy which has depressed consumer spending, and the growth of internet retailing which has seen many retail businesses abandon the high street and move online.

Edinburgh heads the list in Scotland’s major urban centres with the council enjoying an income of more than £5.1 million from its levy on empty commercial properties, closely followed by Glasgow City Council with £5.0 million.

But Highland property owners paid the most in empty property rates in Scotland – almost £6 million – and almost £1 million more than those in Glasgow, which has a population two and a half times larger.

MAJOR SCOTTISH COUNCILS’ NON-DOMESTIC RATES LEVIED ON EMPTY PROPERTIES.  

   Council                              2009-10 (£)         2011-12 (£) 

• Aberdeen City                     1,830,896             1,839,829 
•  Dundee City                       1,196,828             1,350,028
•  Edinburgh                          4,992,990             5,119,754
•  Glasgow                              4,301,418             5,075,310
•  N. Lanarkshire                   2,276,664             2,023,140
•  S. Lanarkshire                    1,939,618             2,663,474
•  Highland                             5,145,433             5,999,709 

Total revenue raised across the UK in business rates on empty properties in 2011-12 came to a massive £11.1 billion, up by 19 per cent on 2009-10.

The figures have been gathered in a series of Freedom of Information requests by The Taxpayers Alliance. It is the first time that a figure has been calculated for the amount collected in empty property rates since exemptions for empty commercial and industrial properties were abolished at the 2007 Budget.

Prior to 2007, empty industrial properties were exempt from Business Rates and empty commercial properties were subject to extensive reliefs and reductions. Now, apart from a short exemption period and extremely limited reliefs, full Business Rates are payable on all empty commercial and industrial properties.

In Scotland a reduction in rates relief to firms with empty commercial premises came into effect last week. CBI Scotland estimates that the change is set to cost firms in Scotland £36 million in additional business rates over the next two years.

Said CBI Scotland’s assistant director, David Lonsdale, “The decision to introduce this £18 million a year tax rise on businesses with empty premises is bewildering and disappointing. It is a tax on distress and is wholly at odds with Scottish Government promises to promote private sector investment.

“When unveiling this tax rise the Scottish Government’s Finance Secretary said it would  ‘incentivise’ the use of empty commercial premises, however for our members it feels more like a stick than a carrot. After all, commercial premises are rarely left empty on purpose and particularly where they do not generate an income.

“Coupled with the supplementary rates levy on larger retailers introduced last year, this now means £131 million of new additional business rate taxes are being introduced during the current 3-year spending review period.”

The Taxpayers Alliance reports that with the downturn making it increasingly difficult for landlords to find new tenants, this tax has had some devastating effects south of the border.

These include some property owners having to resort to demolishing properties rather than paying the full rates while unable to find new tenants and pensioners who bought commercial units as a means of supplementing their retirement income facing economic ruin after being hit by crippling bills.

A number of senior members of the Coalition Government were vocal in their criticism of this tax on empty property while in opposition.

Senior politicians from both Coalition parties opposed the tax in opposition. Vince Cable said that penalising property owners for their properties being vacant was “a ludicrous situation, completely counterproductive and economically very damaging,” whilst Michael Gove described the removal of empty property rate relief as being “universally recognised as a wicked and ungodly act.”  However, once in Government, both Coalition parties have justified it on revenue-raising grounds.