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The United Kingdom (UK) government charges commercial real estate owners a business tax rate on their properties even when they are not doing business there, and many experts say the practice is untenable during the country’s current economic struggle. Experts say it may be worse that the same charges apply even if the owners demolish their buildings in an effort to get a tax break, although it only lasts for six months. A survey conducted by the Royal Institute of Chartered Surveyors shows 90% of surveyors believe the taxes are crippling the chances for a recovery, although those same taxes are what is used to fund local services. For more on this continue reading the following article from Property Wire.

Over 90% of surveyors in the UK believe that charges placed on shops and offices are significantly detrimental to the recovery of the nation's town centers.

Over half also believe that charges are even a contributory factor in property owners demolishing their premises, according to a new survey from the Royal Institution of Chartered Surveyors (RICS).

When commercial premises, such as a shop or an office, become vacant the owner is not required to pay business rates for three months. For industrials and warehouses the rates holiday is six months. However, after this period, these charges, known as Empty Property Rates (EPR), are applicable at the full rate, leaving many with a tax bill which they have no means of funding.

RICS said that it is worrying that with industry still suffering, over two thirds, some 68%, of respondents claimed that commercial property floor space is currently vacant for periods of over six months, meaning that the problem of unmanageable taxes is widespread at a time when businesses are most stretched.

Business rates collected from ratepayers are initially passed to central government and then redistributed back to local authorities as part of the Local Government Finance Settlement. These funds then contribute towards financing local services.

With the situation continuing to impact so significantly on towns across England and Wales, the knock on effect is also being felt in capital values. Some 75% of respondents believe that the rental value of retail premises will decrease as a direct result of EPR.

RICS said that it would like to see to see changes made in the government's forthcoming Autumn Statement by way of an extended exemption period for commercial property owners. This would mean that should a retail property owner lose their tenant, no charges would be applicable for six, rather than three, months. This would be extended to twelve months for owners of harder to let property, such as offices and industrial units.

'The charges faced by property owners are quite simply crippling the high street and preventing businesses of all types from achieving financial stability. It is clear that in this difficult economic climate, businesses need all the help they can get,' said Simon Rubinsohn, RICS chief economist.

'We would like to see the government take the initiative in the forthcoming Autumn Statement and offer property owners a longer exemption period. This would allow commercial landlords some much needed breathing space and contribute towards getting the business sector moving again,' he added.

The research report also found that 89% of respondents believe EPR restricts economic growth, 88% considered EPR a significant deterrent for speculative building, 87% believe EPR has had a negative effect on investment across all sectors, 84% support extending the current rate free period and 82% support a 12 month exemption for new build.

This article was republished with permission from Property Wire.