Ministers intend to take steps to counter a threat by property developers to leave buildings unfinished in an attempt to dodge an impending increase in business rates.

The measures, which are due to be announced this week, pit the Government against increasingly angry commercial developers - as the Treasury tries to raise an additional £1 billion in business rates from buildings that are unoccupied.

John Healey, the Local Government Minister, will ask local councils to make better use of existing powers, including forcing developers to speed up the completion of building works so that they cannot dodge taxes by leaving buildings incomplete.

Owners of unoccupied commercial property currently pay little or no business rates but the Government is planning to cut the existing reliefs from next month. That prospect prompted Ian Coull, the chief executive of Segro, to threaten to leave the roof off new unlet developments to avoid the rates bill.

Mr Healey told The Times that his plans amounted to “zero tolerance on commercial vandalism” – and he specifically warned developers against damaging complete but unlet properties. “It would be an extreme step for a property owner to go to the lengths of deliberately vandalising their asset. I do not believe this is likely and I expect the property industry to adapt in a responsible manner.”

Developers argue that leaving buildings incomplete helps them to save money if they fear that they can no longer find tenants for a planned building by the time it is built. Segro estimates that its rates bill will be £8 million higher as the existing system of reliefs is scrapped.

Mr Healey will also indicate that he is prepared to enforce 20-year-old local government finance legislation allowing rate valuation authorities to decide that for tax purposes a building is completed three months from the start of construction even if in reality the building has not been finished.

Tim Wheeler, the chief executive of Brixton, which owns warehouses valued at £2.4 billion, told The Times this month that the imminent changes to rates relief would mean that his company would demolish old buildings earmarked for redevelopment far sooner than planned, leaving “piles of rubble” in their place.

Mr Wheeler has calculated that the scrapping of empty business premises rates relief will reduce Brixton’s earnings this year by at least £5 million.

Responding to the threat, Mr Healey said: “I will not tolerate any deliberate dereliction and will act on new antiavoidance measures if necessary. That is why I will be monitoring the situation closely and why I am reminding councils of their powers to safeguard local areas from potential commercial vandalism.”

Owners of industrial property obtain 100 per cent rate relief when buildings are unoccupied. Owners of other commercial property, shops and offices, obtain 100 per cent relief for the first three months and 50 per cent relief after that.

However, from April 6 industrial property owners will obtain 100 per cent relief for only the first six months that a building is vacant. All other empty commercial properties would have three months’ rates relief and then incur the full amount.

The Treasury expects the cuts to generate an extra £950 million in the 2008-09 tax year and £900 million the year after, and ministers are hoping for a further economic boost because landlords would be obliged to offer lower rents to businesses to offset the risk of a hefty tax bill.

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