Channel 4 started a campaign last week, entitled The Great British Property Scandal. Its aim was to draw attention to the fact that, whilst there are 2 million families in need of a home, there are a million empty properties in the UK - hundreds of thousands of which have lain empty for more than a year.

Although the number is large, it actually represents only a very small percentage of the UK's total housing stock. Even so, wouldn't it be great if there were some kind of government incentive to encourage landlords/property owners?

In fact there are several tax incentives to bring property back into use. To be fair, previous governments have not been short of ideas, such as:

• The Flat Conversion Allowance, which offers 100% tax relief for capital expenditure on bringing back into use residential flats that have been vacant for more than a year.

There are also some significant VAT 'breaks':

• Zero-rating of first sale or grant of a long lease in a property converted to residential use. This means that zero VAT is charged, but any VAT costs incurred can still be reclaimed. Whilst this applies predominantly to commercial properties being converted to residential use, former residential properties may still be eligible, provided they've not been lived in for long enough.

A reduced VAT rate of just 5% for:

• Construction work on residential properties which have been empty for two years or more; or
• Converting residential properties into a different number of residential properties - e.g., a large house into two self-contained flats

There is method to this. Assuming the owner of commercial property is a VAT-registered business, zero-rating the sale, etc., means the owner can reclaim VAT costs but not have to worry about what would otherwise be an exempt supply. The reduced rate of 5% (which is basically as low as the government can go) is a real benefit to a landlord predominantly dealing in residential properties as they are unlikely to be registered for VAT, with supplies in relation to dwellings generally being exempt. Or, for instance, if a large house is no longer viable as a rental property; converting it into smaller dwellings that are more affordable / more marketable will cost money but at least the VAT cost will be significantly reduced.

There's also:

• Stamp Duty Land Tax relief for properties acquired in "Disadvantaged Areas"
• Business Premises Renovation Allowance for bringing commercial properties, in Disadvantaged Areas, back into commercial use
• Land Remediation Relief for bringing derelict or contaminated land back into use.

So, there are lots of tax breaks out there. I was surprised that Channel 4 didn't make more play of this - as per The Great British Property Scandal - The Tax Incentives Are There - But for How Long? - Phil Spencer's project on the programme last Wednesday was an ideal candidate for the Flat Conversion Allowance. It seems a worthy aim, which is why we're keen to raise awareness of the tax incentives - whilst they're still available!

Regards,

TW Ed

The potential benefits of Rent-a-Room Relief by Sarah Bradford, for Property Tax Insider.