A retail landlord has appealed to the government to scrap a stealth tax on empty property, which he says will bankrupt him.

Max Allen, a Kent-based businessman who owns several shops and office units in Chatham, said he will pay £33,000 a year under the new rates system, which will force him either to sell up or file for bankruptcy.

The admission will be a further embarrassment for the government as the campaign against empty rates grows while the economy worsens.

From April this year business rate relief on empty property was cut, with the government claiming it would reduce rents and increase property supply. Business rate relief on empty commercial property was removed. Before this, empty retail and office space received full relief for three months and 50% thereafter, while industrial space (warehouses and factories) received full relief permanently. Since April 1, retail and office space pay full rates after three months’ grace. Industrial space is now charged full rates after six months’ grace.

To add insult to injury, local councils will also be hit by the tax, paying thousands of thousands to central government for any property they have that is vacant. Meanwhile, the BPF has received reports of dozens of buildings being demolished as landlords seek to minimise the financial impacts to their businesses.

While the British Property Federation (BPF), trade body for the property industry, has been campaigning nationally for the relief to be reapplied, many other local businesses may face bankruptcy as growth slows.

The government continues to state that the reforms will help small businesses. Local government minister John Healey said the government ‘would not subsidise empty buildings’ or sanction ‘ghost towns of closed-down shops’.

Allen said the opposite was true. “I face a stark choice: sell the investment - which, in the current world climate, is worth very little; or hold on in the hope things improve, and risk a penniless retirement or bankruptcy if my savings run out,” he explained.

Economic decline in the local area means no tenants are forthcoming, he added.

A backbench rebellion has been growing over the summer, with over 35 MPs signing a Commons motion calling for the government to re-apply the relief forthwith. The BPF set up a hotline for those affected: info@emptyrates.com

Peter Cosmetatos, investment director at the BPF which is leading the campaign to abolish empty rates, said: “Occupiers tied in to leases don't have the demolition option but are also liable to the tax, and many will be driven under. Is this a government committed to helping communities or one stumbling from one disaster to the next?

“We are seeing examples across the country of property owners facing bankruptcy and others demolishing sites to avoid rates. Meanwhile regeneration projects are being shelved in the face of the additional tax burden. In its haste to raise money in the short term, the government is causing real long term damage to the supply of property. New developments are being killed off and perfectly good property is being destroyed as owners choose between bankruptcy and demolition.

"Ironically, empty rates only apply in England and Wales, which means that neither Gordon Brown nor Alistair Darling’s constituents are affected. But it is essential that Gordon Brown should now personally step in and reapply the relief.”

Eric Pickles MP, shadow secretary of state for Communities & Local Government, said: “The changes are nothing less than a £1 billion rise in stealth taxes for local firms. At a time when the property market is so fragile, these tax rises threaten to discourage development and regeneration.”

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