Government revises commercial building tax system

The government has moved to amend its tax policy regarding the use of empty buildings for business purposes.

In a wide-ranging package unveiled by local government minister Phil Woolas, details of legislation targeting the commercial use of disused warehouses, factories and shops were announced.

Under the new measures, a new 100% capital allowance is on hand to help with the cost of renovating unused businesses in deprived areas to encourage the use of run-down buildings, while tax relief for brownfield sites will also be extended.

However, with most empty commercial property currently enjoying 100% tax relief for the first three months and 50% thereafter, the government has moved to tackle what it says is an outdated policy.

Citing the high level of demand for British commercial property and spiralling rent, the government says that from April relief will only be provided for the first three months (six for factories and warehouses), with the full business rate applying thereafter.

Mr Woolas said the reforms would encourage the development of empty properties, but would also address the issue of tax relief for rental purposes, which he said was "frankly daft" in light of the soaring market for commercial rent in the UK.

"Reforming the business tax system will help to ensure that the UK remains an excellent place to do business and to invest," he added.

According to government figures, the value of empty property in London doubled between 1999 and 2005.