Saturday, Aug 23, 2008
Landlords complain about being taxed, and react irrationally
FT: Concern grows over 'bombsite Britain' tax
British cities are “beginning to look like broken teeth”, with hundreds of buildings being razed as the result of a damaging tax on empty property, a government regeneration chief said on Friday. The levy on empty shops, offices and warehouses introduced in April this year has been dubbed by private and public sector opponents the “bombsite Britain tax”. Aimed at landlords who left buildings deliberately empty as they waited for rents to rise, it intended to reduce rents, raise property supply and earn the Treasury almost £1bn in tax. But opponents say it is leading to properties being demolished across Britain, with Swindon Council, for example, saying it will crush a factory on a 14-acre site at North Star Avenue in the town to avoid paying £110,000 in tax. The demolition costs £430,000.
22 Comments
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1. drewster said...
For free access to the article, follow the link through via Google search.
The reaction of landlords seems like a classic case of cutting off one's nose to spite one's face. Once they get over their anger at actually having to pay taxes for once, they'll realise that it's almost always still better value to sell the property than to tear it down. The bricks and mortar might be cheaper than the underlying land for now, but in a few years time they might regret their actions.
A proper land value tax would have nipped this problem in the bud; maybe Labour is secretly moving towards that goal, one small step at a time.
2. Panda said...
What do you think about what I said some years back about plans for the bombing of whole estates and "bringing back the spirit of the 1940's"?
That phrase actualy appeared on CABINET MEMOS from the 2004-2005 period.
Much worse is to come.
To cut costs, how would you demolish whole estates at once?
Just think it through, boys and girls!
3. mark wadsworth said...
The Land Value Taxers warned them that this might happen. Has the gummint never heard about the Window Tax, FFS?
4. Supermike said...
This sort of nonsense by Swindon Council does not surprise me. Some these people who work for the council should not be in their overpaid jobs. It's about time the residents did something about it.
Spending 400k of local tax payers money to knock down a building is criminal when you consider the high level of employment in the town.
5. musn't grumble said...
Well at least it will free up more brownfiled sites for housing so that hopefully we won't have to carry on concreting over the countryside.
6. Stevie Dee said...
"avoid paying £110,000 in tax. The demolition costs £430,000." Sounds like a good PPP, gives the Government a couple of years to figure out what new bit of tax legislation they could bring in after these short-sighted individuals have demolished the property or, better still like one comment has suggested, the government could build housing on the site (after compulsory purchase), how nice for these individuals to clear the site for free!!! People have to realise, that when the "sh!t hits the fan", "sh!t also flows downstream".
7. Ulfar said...
This is why land should be taxed not buildings.
8. titaniccaptain said...
Amazing.......................................Gordon wants to build new houses.....so he creates an environment where builders are forced to pull them down........
9. richc said...
"avoid paying £110,000 in tax. The demolition costs £430,000."
On the face of it, it might seem like the landlords are making a mistake, but what this leaves out of the equation are the PR benefits. If you can tear down one building, and then use that as an example to change tax regulations so that you don't pay taxes on 1,000 other buildings, it might make financial sense. Of course, you need the media and headline-seeking politicians to play along.
That 30 Labour politicians would have signed up to overturn this tax makes me want to vomit. They're supposedly in favor of increasing economic equality, and yet would favor shifting taxes from landlords to council taxes (the only other place the funding will come from), which are highly regressive and disproportionately tax the poor. This is the 10p band all over again. They don't want to increase economic equality, they just want to chase headlines, hoping to keep themselves in a cushy well-paid, under-audited job.
10. Jayk said...
@titaniccaptain,
What the hell are you talking about? Did you read the article? Do you know what you are talking about? This only applies to commercial property, not residential! This can even HELP the housing market by freeing up more sites in the towns and cities for new housing in the future.
Look at Britain's towns and cities: thousands of big commercial properties built speculatively on prime land. Near where I live, there are dozens which have never been filled, some of which were built over five years ago. Tear them down I say. They were mostly a tax con anyway.
11. mark wadsworth said...
@ Jayk, before you lay into TC, don't forget that there are Council Tax exemptions for dilapidated houses, and no tax at all on builders' landbanks. So the same arguments apply to residential, it's just not quite as stark.
12. drewster said...
FYI, business rates are calculated based on "rateable value". In broad terms the rateable value is a professional view of the annual rent for a property if it was available on the open market on a set date. All current rateable values are based on a valuation date of 1 April 2003. All rates are reevaluated every five years by the Valuation Office.
The rateable value is multiplied by the "multiplier" (currently 46.2% for most parts of England) to work out the tax liable. For example a small local shop which is rented out at £10,000 a year pays tax of £4,620 a year. There are a number of potential discounts and allowances, e.g. small business, rural business, charity, etc. However business rates are generally much higher than council tax for an equivalent property.
(Property professionals, please correct me if I'm wrong!)
13. enuii said...
Jayk, where will everyone work in the future, what use is the en-mass building of residential property on commercial land to house more people when most of Britains towns do not have the jobs to enable them to pay the mortgages or rent on them! There have been oft repeated quotes of manufacturing being the saviour of the UK, it won't if there are no convenient sites in its existing towns on which to build them. Oh, and there have also been reports this week that the UK's stock of existing empty housing has crossed the 1 Million properties mark, which is either depressingly true or an example of mass council tax evasion.
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16. a saver said...
Could the government have picked a worse time to introduce this tax, hwn companies are already struggling?
So much for their "green" policies - how much power does it take to knock down a perfectly good building and what about the pollution?
17. mark wadsworth said...
@enuii, that's the point of scrapping Council Tax and Business Rates and replacing them with a uniform flat Site Value Rating (or Land Value Tax) - it would encourage landowners to make best use of their sites. Where there are jobs but no houses, houses will be built - where there are houses but no jobs, factories and offices and shops will be built.
As to one million empty properties - this has been true for years. Whether you blame Two Jags, Council Tax or Business Rates is another question.
18. titaniccaptain said...
@jayk
Sorry I havent replied till now......Went to pub for the day...............Yes I did read the article................I though that alot of large developments fell into the categorie of commercial property because alot are incorporated mixed use developments which is something that GB has promoted with his development of brownfield sites which is in direct relation to the article and to musn't grumble 8.........glad I made you think though :)
19. Titaniccaptain said...
I meant musn't grumble 5.................sometimes its best to read bloggs in relation to previous bloggs Jayk
20. titaniccaptain said...
@jayk
Almost missed this bit of your thread
"This can even HELP the housing market by freeing up more sites in the towns and cities for new housing in the future."............there is no housing shortage......just a shortage of affordable housing............there are already housing estates half built just sitting there waiting for the builders to return.........but they cant sell them............and as I said with mixed development being the new thing for GB builders mat have to pull down the developments due to this bombsite tax
21. Puzzled said...
I don't understand how they can claim they are demolishing buildings to avoid business rates. The rates are less than half the rent the building would get; the cost of demolishing is more than three times the rates; the value of the building would usually be over ten times the rates, even if it needed repair. So to demolish, you must be pretty sure the building is in such a poor state, it ain't worth repairing it and nobody will rent it.
In other words, they are not avoiding business rates, they are demolishing unwanted buildings - the rates charge may bring it forward because they were delaying spending the money it costs to demolish it, despite the fact it was not wanted - it won't be demolished at all if they can get a tenant even for a short period, as any rent is better than none, and it then becomes the tenants duty to pay rates.
So stop talking rubbish, landlords - if any building due to pay empty property rates gets demolished instead I'll eat my hat if it was not already scheduled for demolition / valueless for renting purposes.
22. Jayk said...
1. I know we don't have an undersupply now. That's why I said more in the future.
2. If they don't get used at the height of a massive economic boom they ain't going to be used for a loooong time yet. As I said, most were built speculatively and are used to offset tax, not encourage growth in the local economy.
3. These developments have turned many of our towns into deserts (I'm reminded of the likes of Camberley with it's absolutely huge, empty commercial buildings - and more being built. But no three-bed houses.....). Permanently empty office blocks shouldn't be where homes should be.