When a commercial property sits empty, not generating any income for the owner, it can be a considerable financial burden. In addition to lost rental income, property owners must also contend with the issue of vacant property business rates. These rates, also known as empty property rates, can result in significantly higher tax bills for owners of vacant properties. Understanding how vacant property business rates are calculated and what options are available to property owners can help mitigate some of the financial impacts of owning an empty property.
vacant property business rates are a form of non-domestic rates that are charged on commercial properties that are empty for an extended period of time. Prior to 2008, most empty commercial properties were exempt from paying business rates. However, changes to the legislation in 2008 removed most exemptions for vacant properties, resulting in owners of empty commercial properties having to pay business rates at the full rate after a specified period of time.
The current regulations state that commercial properties are exempt from paying business rates for the first three months that they are empty. After this initial three-month period, most commercial properties are subject to a 100% business rate charge. Some exceptions apply, such as certain industrial properties that may qualify for a 50% discount on their business rates after the initial three-month period.
The rates at which vacant property business rates are charged are determined by the rateable value of the property, which is assessed by the Valuation Office Agency. The rateable value is based on the annual rental value of the property and is used to calculate the amount of business rates that must be paid each year. If a property remains empty for an extended period of time, the burden of paying business rates on a property that is not generating any income can quickly add up.
For property owners facing the challenge of paying vacant property business rates, there are some options available to help alleviate the financial burden. One common strategy is to seek temporary tenants or licensees to occupy the property on a short-term basis. This can help demonstrate to the local council that the property is actively being marketed and is not completely vacant, which may result in a temporary exemption or reduction in business rates.
Another option for property owners is to apply for relief or exemption from paying vacant property business rates. Certain types of properties, such as charities, community amateur sports clubs, and buildings with a rateable value of less than £2,900, may be eligible for exemptions or discounts on their business rates. Owners of properties that are undergoing major renovations or refurbishments may also be able to apply for relief from paying business rates during the period of work.
It is important for property owners to be proactive in seeking out these opportunities for relief or exemption, as failing to pay vacant property business rates can result in significant financial penalties. Local authorities have the power to take legal action against property owners who fail to pay their business rates, including taking possession of the property or seeking a court order to recover the unpaid rates.
In addition to seeking relief or exemption from paying vacant property business rates, property owners should also consider other strategies for minimizing the financial impacts of owning an empty property. This may include negotiating with the local council to reduce the rateable value of the property, seeking ways to increase the property’s market value and appeal to potential tenants, or exploring alternative uses for the property that may generate income and reduce the burden of paying business rates.
Overall, vacant property business rates can pose a significant financial challenge for property owners, especially those who are already struggling with the costs of owning an empty property. By understanding how vacant property business rates are calculated and exploring options for relief or exemption, property owners can take steps to mitigate some of the financial impacts of owning a vacant property. With careful planning and proactive management, property owners can navigate the complexities of vacant property business rates and minimize the financial burden of owning an empty property.