Business rates are a tax levied on most non-domestic properties in the UK, including shops, offices, pubs, warehouses, and factories. These rates are calculated based on the rateable value of a property, which is determined by the Valuation Office Agency (VOA). However, what happens when a property is empty? In this article, we will delve into the complexities of business rates on empty property.
When a property becomes vacant, the owner is still liable to pay business rates on the empty property. This may come as a surprise to some property owners, as they may assume that no business rates are due when there is no business operating on the premises. However, this is not the case. The rationale behind this policy is to discourage property owners from leaving properties empty for extended periods of time, as this can have negative effects on the local community and economy.
The rateable value of an empty property is calculated in the same way as an occupied property, based on the potential rental value of the property as of 1 April 2015. The business rates payable on an empty property are generally set at 100% of the full occupied rate for the first three months. After this initial period, the rateable value of the property is reduced to 90% for the next three months, and then to 85% for properties that have been empty for over six months. This reduction is intended to provide some relief to property owners who are struggling to find tenants for their empty properties.
There are certain exemptions and reliefs available for empty properties in certain circumstances. For example, properties with a rateable value of less than £2,900 are exempt from business rates altogether. Additionally, listed buildings, buildings with a rateable value of less than £12,000, and properties owned by charities or community amateur sports clubs may also be eligible for relief. It is important for property owners to be aware of these exemptions and reliefs to ensure that they are not paying more than they are legally required to.
One common misconception about business rates on empty property is that if a property is being actively marketed for sale or let, then no business rates are due. While actively marketing a property may help to reduce liability for business rates, it does not exempt the property owner from paying them entirely. The property owner must still pay the applicable business rates until a new tenant or owner is found.
Another point to consider is that business rates on empty property are a devolved matter in the UK, meaning that the rules and regulations may vary depending on which country the property is located in. For example, in Scotland, empty properties may be exempt from business rates for an extended period if they are undergoing refurbishment or are on the market for sale or let. Property owners should familiarize themselves with the specific regulations in their area to ensure that they are compliant with the law.
Despite the challenges of paying business rates on empty property, there are steps that property owners can take to minimize their liability. For example, landlords can consider negotiating a break clause in their lease agreements with tenants, allowing them to repossess the property if it becomes vacant. Additionally, property owners should regularly review their property portfolio to identify any empty properties and take proactive steps to minimize their liability for business rates.
In conclusion, business rates on empty property can be a significant financial burden for property owners. Understanding the regulations and exemptions available can help property owners to manage their liability and reduce their overhead costs. By staying informed and taking proactive steps to mitigate their liability, property owners can ensure that they are compliant with the law while also protecting their bottom line.