Empty properties can be a burden for any business owner. Whether it’s due to relocation, downsizing, or simply being unable to find a tenant, managing an empty property can come with additional costs – one of the biggest being business rates. In the United Kingdom, business rates on empty property have long been a point of contention for commercial property owners. Understanding the rules and regulations surrounding these rates is crucial for any business owner looking to minimize financial strain and maximize opportunities for their property.
Business rates are essentially a tax on non-domestic properties, including shops, offices, warehouses, and factories. The rates are calculated based on the rateable value of the property, which is determined by the Valuation Office Agency (VOA). However, when a property becomes vacant, the rules regarding business rates change.
In the past, businesses were granted a 100% exemption from business rates on empty property for the first three months after it became vacant. This exemption was seen as a way to give businesses some breathing room as they looked for new tenants or decided the future of the property. However, the rules changed in 2008 with the introduction of the Empty Property Rate.
Under the Empty Property Rate, businesses are no longer entitled to a complete exemption from business rates on empty property. Instead, they are required to pay the full business rate after the property has been empty for three months (or six months for industrial properties). This change was implemented as a way to discourage property owners from leaving properties vacant for extended periods of time and to generate revenue for local authorities.
For businesses with multiple properties or a substantial property portfolio, the Empty Property Rate can quickly add up to significant costs. Managing these expenses can be challenging, especially when the property market is slow or when finding tenants becomes increasingly difficult. Some property owners may even consider demolishing their empty buildings to avoid paying business rates altogether – a drastic measure that highlights the financial strain that these rates can place on businesses.
There are, however, ways in which property owners can mitigate the impact of business rates on empty property. One option is to take advantage of the Government’s various relief schemes. For example, properties with a rateable value of less than £2,900 are exempt from business rates, even when empty. Additionally, certain types of properties, such as agricultural buildings and listed buildings, may also qualify for relief.
Another strategy for reducing the burden of business rates on empty property is to actively market the property for rent or sale. By demonstrating efforts to reoccupy the property, businesses may be eligible for a 50% discount on their business rates for up to 18 months. This can provide some much-needed financial relief while also incentivizing property owners to find new tenants.
For businesses that are struggling to find tenants or buyers for their empty properties, it may be worth considering alternative uses for the space. Converting the property into a new type of business or even residential units can not only generate income but also potentially qualify for different rates and relief schemes. Working with a property advisor or consultant can help businesses explore all options and make informed decisions about the future of their empty properties.
Ultimately, navigating business rates on empty property requires careful planning and proactive management. By staying informed about the regulations and relief options available, property owners can make strategic choices that minimize costs and maximize opportunities for their properties. While the Empty Property Rate may present challenges, it also presents opportunities for businesses to rethink their property strategies and find innovative solutions for their empty properties.