When it comes to owning or managing commercial properties, one of the many factors that need to be considered is business rates on vacant property. These rates can have a significant impact on the financial health of a business, especially if it is struggling to find tenants or is in the process of being refurbished. In this article, we will explore what business rates on vacant property are, how they are calculated, and what options are available to property owners who are facing these charges.
Business rates are a tax on non-domestic properties, such as shops, offices, warehouses, and factories. They are charged by local authorities in England, Scotland, and Wales to help fund local services. Business rates are calculated based on the rateable value of a property, which is determined by the Valuation Office Agency (VOA). The rateable value represents the estimated annual rental value of the property on the open market as of a specific date.
When a property becomes vacant, it may still be liable for business rates. This is because the property is still considered to have a rateable value, even if it is not generating any income. In some cases, property owners may be eligible for empty property relief, which provides a discount on business rates for a set period of time. However, this relief is not automatic and must be applied for through the local authority.
The amount of empty property relief that a property owner can receive varies depending on the location of the property and its specific circumstances. In England, for example, empty retail properties with a rateable value of less than £51,000 are eligible for a three-month exemption from business rates. After this period, the property owner may be required to pay the full rate or a reduced rate, depending on the local authority’s guidelines.
In Scotland, there are different rules for empty property relief, with properties eligible for a 50% discount on business rates for up to three months. The rules in Wales are similar to those in England, with a three-month exemption period for certain types of properties.
For property owners who are struggling to find tenants or are in the process of refurbishing their properties, business rates on vacant property can present a significant financial burden. This is especially true for small businesses or start-ups that may not have the resources to cover these additional costs. In some cases, property owners may be forced to sell or abandon their properties due to the high cost of business rates.
There are, however, some options available to property owners who are facing business rates on vacant property. One option is to apply for an exemption or relief from the local authority. This may involve providing evidence of the property’s vacancy or the owner’s financial hardship. Property owners can also seek professional advice from a surveyor or tax advisor to help navigate the complex rules and regulations surrounding business rates.
Another option for property owners is to consider leasing or renting out the property on a short-term basis. This can help generate some income to offset the cost of business rates while also keeping the property occupied and maintained. Property owners may also consider offering incentives to potential tenants, such as rent-free periods or reduced rates, to attract new occupants and minimize the impact of business rates on vacant property.
In some cases, property owners may be able to negotiate with the local authority to reduce the rateable value of the property. This can be done through the VOA’s appeals process, which allows property owners to challenge the valuation of their properties if they believe it is inaccurate or unfair. By providing evidence of comparable properties and market conditions, property owners may be able to secure a lower rateable value and reduce their business rates liability.
Overall, business rates on vacant property can be a complex and challenging issue for property owners to navigate. However, by understanding the rules and regulations surrounding business rates, seeking professional advice, and exploring all available options, property owners can minimize the financial impact of these charges and ensure the long-term success of their properties.