Small businesses are entitled to a relief on paying business rates of 50% for properties empty for more than three months. Now they will have to pay the full rate.

Companies with industrial and warehouse properties will have to pay the whole amount after six months, rather than getting a 100% deduction as previously.

Deloitte Real Estate Tax Partner Phil Nicklin, said: ‘The government would like this measure to encourage empty properties back into the letting market, but ironically it could encourage owners to partially demolish them to take them off the rating list altogether.’

The move is set to benefit the Exchequer to the tune of an extra £950m by the end of the 2008 tax year and by another £900m during 2008/09.

In coming to his decision to withdraw the breaks, the chancellor said that he had followed the recommendations of the Barker Report which set out a range of policies for improving the functioning of the housing market and representations from the Federation of Small Businesses.

‘Commercial property lying empty should not continue to be given generous business rate relief, particularly because this leads to higher rents in areas with highest demand,’ said Brown.

‘To encourage better use of commercial premises I will restrict the relief available for empty industrial properties to six months, and for empty offices and retail to three months.’

Brown decided to spare charities from the same fate by announcing a get out clause for charitable organisations.