Colchester: ‘Unfair’ taxes on empty shops are killing the high street

Empty shops in Colchester Town Centre's Sir Isaac Walk

Empty shops in Colchester Town Centre's Sir Isaac Walk

THE future of town centres is being risked by councils raking in millions of pounds taxing empty shops, it was warned last night.

Campaigners claim high streets are being “kicked when they are down” after it was revealed landlords in north-east Essex paid nearly £23m in business rates on empty properties in the last three financial years.

But borough chiefs insist subsiding empty properties would force them into increasing council tax, adding the buildings could be converted into charities or restaurants to receive tax reliefs.

Colchester landlords paid out £1.6m in business rates for empty properties in 2011/12 – a 46% hike from 12 months previously when £1.1m was collected.

David Burch, director of policy at Essex Chambers of Commerce, said the taxes were having a detrimental effect on town centres.

“These taxes are making it very difficult for the high street,” he said. “There needs to be incentives for people to own high street shops, but these empty property taxes do the opposite.

“Shops in the high street are therefore left to decline. They get run down, windows are broken and paint deteriorates. They become eyesores and have a detrimental affect on the appearance of the high street.

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“Small businesses and individuals own these premises, not just large organisations, and being taxed is just adding to their burden of receiving no income.

“The situation needs to be seriously reviewed.”

Landlords in Braintree have paid out £10.9m in the last three financial years, while in Tendring it was £1.1m and £7.1m was paid out in Chelmsford – a 42% rise in the last 12 months. Overall in Colchester it was £3.8m over the three years.

Matthew Sinclair, chief executive of the TaxPayers’ Alliance, said the “extremely unfair” empty property taxes are “undermining the prospects for economic growth”.

“Business rates charged on empty properties are kicking high streets when they are down,” he added.

“The threat of having to pay these extremely unfair taxes makes investors very cautious about taking properties on and doing them up. It reinforces a terrible cycle of decline.

“The government has talked of supporting the high street and one of the best ways it could do that would be to reintroduce relief on empty shops.

“It’s not made any easier to open up a store and invest in the community when the tax man is banging on the door for the rates for an empty building.”

HM Revenue and Customs set rateable values for non-domestic premises – such as shops, offices and warehouses – and authorities use these to calculate how much to charge property owners.

Property owners are exempt from paying business rates on empty properties for three months, and buildings with a rateable value under £2,600 are exempt until they become occupied again.

But following threshold changes enforced in April 2011, properties valued above £2,600 are charged the full amount after the three-month period has expired.

A previous 50% relief on rates for owners of empty buildings was scrapped in 2008, but Paul Smith, resources portfolio holder for Colchester borough council, defended the tax.

“I think it is right, as otherwise we would have to keep subsidising it and council taxes would have to go up to pay for it, which I don’t think is right,” he said.

“By charging these business rates we encourage property owners to not just let their properties sit there and do nothing. It will motivate them to get a tenant in as soon as possible.

“There are other alternative uses as well. They can receive reductions by becoming charity shops, or convert their buildings into housing estates or restaurants.”

Lewis Chambers, commercial partner at Fenn Wright in Colchester’s town centre, said: “I would argue that the introduction of empty business rates has been counterproductive, detrimentally affecting the health of our town centres and detrimentally affecting the viability of redevelopment and investment.

“While some supporters of this tax argue that it has incentivised landlords to reduce rents and make property available on competitive terms, this is a short term outlook.

“The proposed 2015 revaluation of all commercial property for business rates purposes has been postponed, something of a disaster for the town centre retailers whose rateable values remain referenced to the much higher levels of value which existed in April 2008.”