By Sinead Cruise
LONDON, Nov 18 (Reuters) - Countless shops, warehouses and offices could disappear from Britain's towns and cities in coming months unless the government scraps a controversial tax on vacant commercial property, a trade body said on Tuesday.
The British Property Federation (BPF), which represents UK property companies and real estate investment trusts (REITs), said it would call on the government this week to restore business rates relief to landlords of empty buildings.
Since April, commercial property owners have been forced to pay full business rates for local services such as refuse collection and emergency services even if their buildings are unoccupied.
But with no rental income to help pay the levy and vacancy rates on the rise, some struggling landlords are demolishing properties they cannot let in an attempt to escape the tax, the BPF said.
The trade body cited a list of examples including one property owner who it said had demolished a total of 155,000 square feet of mostly industrial space in southwest, northeast and central England, having decided it was a cheaper option than paying rates on the empty premises.
"At a time where promoting investment in UK business is more vital than ever, ministers seriously need to re-evaluate the damage that empty rates (are) doing and immediately reapply the relief, at least for the duration of the downturn," said Liz Peace, chief executive of the BPF.
FIXED TAX
The BPF said removal of the levy -- dubbed the "bombsite Britain tax" by critics -- has become imperative as Britain's economic outlook weakens, forcing more tenants out of business and heaping pressure on the debt-strapped property sector.
The BPF said the tax not only threatened small businesses but was damaging the international competitiveness of much larger property investors, including UK REITs.
"Introducing UK REITs was a massive success for the Treasury that they are now systematically undoing. is essentially a fixed tax on a supposedly tax-efficient investment vehicle," Peace said.
The BPF campaign was backed by several property companies. "This outrageous piece of taxation is hitting the whole of the British economy at a time of severe downturn," Ian Coull, chief executive of Segro said.
"It is an iniquitous tax at the best of times but to impose it on the market when we are fighting for our lives is just madness," Coull said.
John Richards, chief executive of Hammerson, said the levy was "a tax on a loss" which was hitting vulnerable small and medium-sized businesses hardest.
"An incentive to demolish usable buildings is not supporting economic revival and can only damage the economy in the longer term," Richards said. (Editing by David Holmes)