If you own or lease a commercial property, you are likely familiar with the concept of business rates. These rates are taxes imposed on non-residential properties to help fund local services and infrastructure. However, what happens when a commercial property is left vacant? Are you still required to pay business rates on an empty building?
The short answer is yes, but the rules and regulations surrounding rates payable on empty commercial property can be complex and confusing. In this article, we will provide an overview of the key considerations and provide insight into how you can manage the rates on your empty commercial property.
Business rates are based on the rateable value of a property, which is determined by the government’s Valuation Office Agency (VOA). The rateable value is a reflection of the rental value of the property at a specific point in time. Business rates are then calculated based on the rateable value and a multiplier set by the government. The rates payable on a commercial property can vary significantly depending on the location, size, and usage of the property.
When a commercial property becomes vacant, the responsibility for paying business rates falls to the owner or leaseholder of the property. This can be a significant financial burden, especially if the property remains vacant for an extended period of time. In some cases, owners may be eligible for relief on their business rates for empty properties, but this relief is not automatic and must be applied for.
The government provides a few types of relief for business rates on empty commercial properties. The most common is known as the empty property rate relief, which reduces the rates payable on a vacant commercial property by 50% for the first three months. After this initial period, the property is subject to full business rates unless it falls into a specific category that is eligible for extended relief.
One such category is industrial properties with a rateable value of less than £2,900. These properties are eligible for indefinite relief on their business rates while they remain vacant. Similarly, properties with a rateable value of less than £12,000 may be eligible for small business rate relief if they are empty. This relief can reduce the rates payable on an empty property to zero for a specified period.
It is important for owners and leaseholders of empty commercial properties to be aware of these relief options and to apply for them if they are eligible. Failure to do so can result in hefty fines and penalties for non-payment of business rates. Additionally, it is important to keep the local council informed of any changes to the status of the property, such as occupation or renovations, to avoid any misunderstandings or incorrect billing.
Another consideration for owners of empty commercial properties is the impact of rates on the property’s value and marketability. Potential buyers or tenants may be deterred by the prospect of paying full business rates on an empty property, which can make it difficult to sell or lease the property. It is important to factor in the cost of rates when setting the price or rent for an empty commercial property to avoid overpricing and to attract potential tenants or buyers.
In some cases, owners of empty commercial properties may consider demolishing or renovating the property to avoid paying business rates. However, this can be a costly and time-consuming process, and it is important to weigh the potential savings against the costs and risks involved. It is recommended to seek professional advice from a surveyor or property consultant before making any decisions about the future of an empty commercial property.
In conclusion, rates payable on empty commercial property can be a significant financial burden for owners and leaseholders. It is important to be aware of the relief options available and to apply for them if eligible. Additionally, owners should consider the impact of rates on the property’s value and marketability when setting prices or rents. By understanding the rules and regulations surrounding business rates on empty properties, owners can effectively manage their financial obligations and maximize the potential of their commercial properties.