UK property groups plead for extended business rates holiday

More than 50 commercial property groups are calling on the UK government to extend the business rates holiday to all sectors of the economy, saying that without help many companies risk bankruptcy.

The firms, which include flexible workspace providers such as IWG, Workspace and Landmark, as well as a number of property advisory companies and agents, are writing to chancellor Rishi Sunak on Wednesday to request an extension to the tax break.

Without the holiday, which would cost the government between £15bn-£20bn in lost tax receipts, “businesses, jobs and livelihoods” risk being lost, the letter will say.

“Anxiety levels are at an all-time high. In the absence of relief there will be job cuts and businesses will go to the wall,” said Luke Philpot, joint chief executive of DeVono Cresa, an adviser to tenants in office buildings, and one of the letter’s signatories.

Business rates — the tax on properties used for commercial purposes such as pubs, offices or shops — typically follow staff wages and rents as a company’s main expense, and have become a point of contention for companies struggling in the face of the coronavirus lockdown.

A flexible workspace provided by IWG. Such spaces have now fallen empty © Stuart Freeman

The government has waived rates for tens of thousands of businesses in the retail, leisure and hospitality sectors, but flexible-office providers are still obliged to pay, despite the premises they operate having fallen empty. 

“There’s hardly a sector of the economy that’s not being adversely affected by coronavirus. Even those businesses which haven’t been ordered to close are effectively forced to by social distancing measures, said Jerry Schurder, head of business rates, at property advisory Gerald Eve.

“Some sectors, like offices and manufacturing, are being impacted but still having to pay full rates . . . You have to question the fairness of that,” he added. 

According to property advisory Altus Group, about 355,000 properties have benefited from the existing rates holiday, worth an average of about £28,000 per property. That will cost the exchequer more than £10bn in lost revenues for the 2020-21 tax year, according to Altus.

An extension of the scheme to cover all commercial properties would cost a further £15bn-£20bn, according to Mr Schurder.

For flexible office operators, whose rental income has fallen precipitously, “a holiday would mean a huge amount,” said John Spencer, chief executive of Landmark. Business rates are a considerable cost, equivalent to 40-45 per cent of rents, he estimated.

Meanwhile, the government has privately poured cold water on a separate proposal from landlords to “furlough” commercial premises, under which the state would subsidise unpaid rent. Officials said that the idea — originally floated by the British Retail Consortium and British Property Federation on April 20 — would incur huge costs for taxpayers. 

However, ministers have been engaging with industry representatives and say that they are open to the idea of more modest assistance.

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