business rates on empty property can be a confusing and frustrating aspect of owning a commercial property. Many business owners are unaware of the implications and potential costs associated with keeping a property vacant. In this article, we will delve into the world of business rates on empty property, exploring what they are, how they are calculated, and what steps can be taken to mitigate their impact.
Business rates are a type of tax that is levied on non-residential properties in the UK. They are calculated based on the rateable value of the property, which is determined by the government’s Valuation Office Agency (VOA). The rateable value is an estimate of the open market rental value of the property at a specific date, and it is used to calculate the amount of business rates that are due each year.
When a commercial property is vacant, the owner is still responsible for paying business rates on the property. This can come as a shock to many property owners, as they may assume that they are exempt from paying rates on a property that is not generating any income. However, the government’s rationale behind this policy is to discourage property owners from leaving their properties empty for extended periods of time, as vacant properties can have a negative impact on local communities and economies.
business rates on empty property are calculated differently depending on the length of time that the property has been vacant. In England, businesses are given a three-month grace period during which no rates are due on a property that has become vacant. After this grace period expires, the property owner is required to pay full business rates on the property. However, there are some exceptions to this rule, such as newly built properties that have not yet been occupied or properties that are exempt from business rates for other reasons.
After three months of vacancy, the property will be subject to an empty property rate, which is set at 50% of the full business rates that would be due if the property were occupied. This rate is intended to provide an incentive for property owners to bring their vacant properties back into use, as it can be significantly cheaper to do so than to continue paying the empty property rate.
After a property has been vacant for more than two years, the empty property rate increases to 100% of the full business rates that would be due if the property were occupied. This can be a substantial financial burden for property owners, especially if they have been unable to find a tenant or buyer for the property.
There are some exemptions and reliefs available to property owners who are struggling to pay business rates on empty property. For example, properties with a rateable value of less than £2,900 are exempt from paying business rates, regardless of whether they are occupied or vacant. Additionally, certain types of property, such as agricultural land and buildings, are also exempt from business rates.
For properties that are being refurbished or undergoing structural changes, there is a 100% relief available for the first three months that the property is unoccupied. This can provide some much-needed financial relief for property owners who are investing in their properties but are temporarily unable to generate income from them.
It is important for property owners to be proactive in managing their vacant properties in order to avoid being hit with high business rates bills. One option is to consider leasing the property on a short-term basis to a pop-up shop or temporary tenant, which can help generate income and reduce the amount of business rates that are due on the property.
Another option is to seek out charities or community groups that may be interested in using the property for a temporary purpose, such as a community center or art gallery. By allowing these organizations to use the property rent-free, property owners can qualify for a 100% relief on the business rates that would otherwise be due on the property.
In conclusion, business rates on empty property can be a significant financial burden for property owners, but there are ways to mitigate their impact. By understanding how business rates are calculated and taking proactive steps to manage vacant properties, property owners can minimize their costs and potentially even generate income from properties that would otherwise be sitting empty.