Under the Government proposals introduced by local government minister Phil Woolas businesses which fail to lease empty commercial property will be liable for higher rates.

The move is aimed at encouraging businesses to promote regeneration of deprived areas. It is also expected to encourage more businesses to take up residence on brownfield sites.

At present, most empty commercial properties receive a 100 percent relief from taxation for the first three months, and 50 percent thereafter; and empty warehouses and factories receive a permanent exemption from rates.

From April 2008, the relief will be modernised. Empty commercial property will be liable for the full business rate after an initial rate-free period of three months, or six months for factories and warehouses.

The move is expected to apply downward pressure on commercial property rents as it increases the availability of properties on the market and boosts market competition. Charities and community amateur sports clubs will be granted a complete exemption from rates on their empty properties.

Phil Woolas said: "The reforms will encourage owners of empty properties to bring them back into use, helping to create thriving and vibrant town centres. No-one wants to live or work next to an empty property, and it is frankly daft for the state to subsidise it when commercial rents are so high. "That is why a package of reforms that will drive down those rents, encourage business growth, and promote brownfield development is needed. As well as reforming empty property rates, from last month a new 100 percent capital allowance is available for the cost of renovating or converting unused businesses in deprived areas. Together these measures will incentivise and support action to bring empty shops, offices and warehouses back into use.”

Woolas added: "Reforming the business tax system will help to ensure that the UK remains an excellent place to do business and to invest. Reducing the rate of corporation tax whilst committing to retain the RPI cap on the yield from business rates - which have remained constant in real terms since 1990 - means that the demand for good quality business property and a vibrant urban environment will remain high.”

The Federation of Small Businesses said it was a welcome move which would encourage owners to let their properties and not leave them empty.