Azara Blog: Business premises are being demolished to avoid tax liability

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Date published: 2008/08/26

The BBC says:

Buildings are being knocked down as businesses seek to avoid paying tax on empty properties, a government regeneration chief has warned.

In April, the government scrapped rate relief on empty industrial property such as warehouses.

The tax was aimed at landlords who kept premises empty in hope of better rents.

But John Nicholls, chief executive of the Urban Regeneration Companies, said the tax was leading to "pre-emptive demolitions" to avoid the tax bill.
Malcolm Holmes, associate director at property consultancy GL Hearn, said his company had advised an industrial landlord in Sunderland to demolish parts of the Alexandra Business Park to avoid an annual £120,000 tax bill.

"Before April 1, there was no rate payable. Their liability went from zero to £120,000 overnight."

He said that the company had demolished 150,000 square feet of property and was due to raze a further 37,000 to 38,000 square feet.

There is hardly a tax change that Gordon Brown has recently brought in that is not a complete and utter disaster. You could easily argue that zero liability was wrong. But to go from zero to one hundred percent overnight is just too stupid for words. And, needless to say, businesses will respond to this (negative) incentive in the obvious way. Unfortunately the geniuses in the Treasury for some reason failed to grasp this simple lesson in Economics 101. (Or perhaps they own shares in demolition companies.)

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