Friday, December 14, 2012

The joy of property rates

I've mentioned in the past how much councils charge business in rates (for services they don't receive) how this can be lowered thanks to Small Business Rate Relief which was set to be cancelled next year. What I can't seem to find is remarks regarding empty properties. I'll rectify that now.

Keeping it simple empty industrial properties were exempt from paying council tax rates. Some thought this unfair and some thought that it allowed landlords to keep rents high as they lacked incentive to rent out the building (such people being idiots as landlords are still required to pay utility bills from a zero-income building) as such the Labour government introduced a cap. If the Rateable value of your building was over £15,000 rates would need to be paid; the next year they raised the threshold to £18,000. In 2011 the Conservatives lowered it to £2,600.

Currently the council tax multiplier is set to 45.8p that means a property valued at £12,000 RV that stands empty and paid nothing now accrues a charge of £5,496 a year just as if someone was renting it. Recall that this is on something that is generating zero income. How would that translate to domestic property?

Take a property worth £100,000 rent per month is set to 1% or £1,000 which is an RV of £12,000 per annum. If it were a business it would pay that £5,496. In Stourport it's a Band E property and thus is charged £1,848.22 or almost a third the amount; oh and they'd have their bins emptied too.

Logic says that companies make more money. Except companies also have to pay tax - company, NI etc. which a household doesn't. So why are businesses charged in a different way to domestic premises? Isn't doing so a disincentive to all these home-start businesses?

I'm being serious if you start a business at home then you're supposed to notify the council as the room you call your 'office' is now subject to business levels of rates if used primarily for that function. So that's the full whack of domestic council tax plus the RV of that room multiplied by 45.8p. Assuming, of course, that you have permission anyway as your work may constitute a change of use and require planning permission.

It's a bit of a joke, but this distinction is not helping the economy.