Tax reforms to revitalise town centres

Business rate relief on empty properties is to be reformed to try to revive run-down high streets. Ministers are preparing changes so business rates are paid even when a property is empty.

The move, designed to push landlords into selling or redeveloping empty properties rather than leaving them boarded up, is expected to drive down commercial rents and revitalise town centres.

Under plans to be announced by Phil Woolas, the Local Government minister, properties will be required to pay full business rates after three months standing empty, while factories will have to pay them after six months. Charities and amateur sports clubs will be exempt altogether.

Most empty commercial property currently receives 100 per cent tax relief for the first three months, and 50 per cent thereafter. Warehouses and factories receive 100 per cent relief at all times. The tax changes, due to come into force next April, are expected to bring down the cost of rent as more property comes on the market. Businesses in Manchester and Birmingham at present pay more to rent their offices than their counterparts in New York, Hong Kong or Milan.

Mr Woolas said the current system of providing rate relief was a barrier to the Government's drive to create thriving and vibrant town centres.

"No one wants to live or work next to an empty property, and it is frankly daft for the state to subsidise it when commercial rents are so high," the minister said. "That is why a package of reforms that will drive down those rents, encourage business growth and promote brownfield development is needed.

"As well as reforming empty property rates, from this month new capital allowances are available to renovate or convert unused businesses in deprived areas. [The reforms] will ensure the UK remains an excellent place to do business and to invest."