When it comes to owning commercial property, there are many expenses to consider beyond just the initial purchase price. One of these ongoing expenses that can catch property owners off guard is the rates payable on empty commercial property. These rates, also known as business rates, are taxes levied by local authorities on non-residential properties. They can be a significant financial burden for property owners, especially if the property remains vacant for an extended period of time.
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 an estimate of the property’s open market rental value as of a specific date, known as the valuation date. The VOA reassesses the rateable value of all non-domestic properties in England and Wales every five years.
Once the rateable value of a property is determined, the local authority uses this value to calculate the rates payable by the property owner. The rates payable are calculated by multiplying the rateable value of the property by the national non-domestic multiplier, also known as the uniform business rate (UBR). The UBR is set annually by the government and is the same rate for all non-domestic properties in England, regardless of location.
For empty commercial properties, the rates payable can be a particularly hard pill to swallow. When a property is unoccupied, property owners are still required to pay business rates, albeit at a reduced rate. The government offers a temporary relief scheme for empty properties, which allows property owners to receive a discount on their rates payable for a limited period of time.
The relief scheme works as follows: for the first three months that a property is empty, the property owner is not required to pay any business rates. After this initial three-month period, the rates payable are charged at 100% of the normal rate for the next three months. Following this six-month grace period, the rates payable increase to 150% of the normal rate for properties with a rateable value of £2,600 or more.
This increase to 150% of the normal rate can be a significant financial burden for property owners, especially if they are struggling to find tenants for their empty commercial properties. In some cases, property owners may be eligible for additional relief if their property meets certain criteria, such as being in a designated enterprise zone or rural area.
It’s important for property owners to be aware of their obligations regarding business rates on empty properties and to plan accordingly. Failure to pay business rates can result in legal action being taken against the property owner, including court action to recover the unpaid rates and additional penalties.
There are some strategies that property owners can employ to mitigate the impact of business rates on their empty properties. One common tactic is to explore the possibility of requesting a reassessment of the rateable value of the property. If the property owner believes that the rateable value assigned by the VOA is incorrect, they can submit an appeal and provide evidence to support their case.
Property owners can also consider leasing their empty properties to charity organizations, as these properties may be eligible for relief from business rates. Additionally, property owners may be able to take advantage of exemptions for properties that are undergoing renovation or are structurally unsound.
In conclusion, rates payable on empty commercial property can be a significant financial burden for property owners. It’s important for property owners to understand their obligations regarding business rates and to plan accordingly to avoid legal action. By exploring strategies to mitigate the impact of business rates, property owners can better manage their finances and protect their investments.