Landlords are facing an extra tax bill of £150million due to a new tax raised on empty buildings, according to an estimate by property consultancy NB Real Estate.
The new empty buildings tax, which was announced last summer and came into force this April, was introduced to keep commercial property companies from leaving buildings vacant rather than putting them to practical use such as helping to resolve a housing shortage.
According to NB Real Estate, the proportion of vacant office, retail or industrial buildings has risen by 15 per cent since the tax law was proposed last year, and overall vacancy rates are now at an average of 12.4 per cent.
For the Treasury
, which originally expected to raise about £950million a year with the new tax, this means an additional windfall of £142.5million and this figure is bound to increase further as the commercial property industry faces its worst downturn for 15 years.
The share prices of big developers have dropped dramatically due to rising yields, falling demand from occupiers and increasingly careful lending of banks, and the new tax of over £1billion will increase the pressure on the buy-to-let mortgage
industry even more.
The property consultancy believes the new tax's impact on the commercial property market will be distorting because the percentage of vacant space will rise during the downturn.
Andrew Warde, director of rating at NB Real Estate said: "This empty rates tax was conceived when the property market was performing strongly but the downturn is heaping misery on misery."
The Treasury, by contrast, denied that the rising vacancy rates would provide it with an additional windfall, as the extra revenue from empty buildings tax would be outweighed by the decline in corporation tax from developers.Fair Investment