When it comes to owning commercial property, there are a number of costs and expenses that can impact the profitability of the investment. One such cost that property owners need to be aware of is the rates payable on empty commercial property. These rates, also known as business rates, can often be overlooked by property owners, but failing to understand and plan for them can have serious financial consequences.
Business rates are taxes that are levied by local authorities on most non-domestic properties, including commercial properties such as offices, shops, warehouses, and factories. The rates are calculated based on the rateable value of the property, which is determined by the Valuation Office Agency (VOA) in England, the Scottish Assessors in Scotland, and the Valuation and Lands Agency in Northern Ireland.
Property owners are required to pay business rates on their commercial properties, whether they are occupied or vacant. However, when a property is empty and not generating any income, the burden of paying these rates can become particularly challenging. In recent years, changes to legislation have made it even more costly for property owners to leave commercial properties empty for extended periods of time.
In the past, property owners were granted a period of empty property relief, during which they were exempt from paying business rates on empty properties. However, changes in regulations have significantly reduced the length of time that this relief is available. Currently, property owners in England and Scotland are granted only three months of relief for most types of properties, while those in Wales are allowed six months. In Northern Ireland, there is no automatic relief, but owners can apply for discretionary rates relief.
After the initial period of empty property relief expires, property owners are required to pay full business rates on their vacant commercial properties. This can be a significant financial burden, especially for owners of larger properties in prime locations. In some cases, the rates payable on empty commercial properties can be higher than those on occupied properties, due to the lack of an occupancy discount.
Property owners also need to be aware that local authorities have the power to charge higher rates on properties that have been empty for an extended period of time. In England, for example, councils have the authority to increase rates by up to 50% on properties that have been vacant for more than two years. This serves as an incentive for property owners to either occupy or sell their vacant properties, to avoid the increased financial burden.
There are some exemptions and reliefs available to property owners who are struggling to pay the rates on their empty commercial properties. For example, properties that are undergoing major refurbishment or structural changes may be eligible for exemption from business rates for a period of 12 months. Additionally, some properties in rural areas or enterprise zones may be eligible for business rates relief.
It is important for property owners to be proactive in managing their empty commercial properties in order to minimize the impact of business rates. One option is to consider letting the property on a short-term basis, even if it is not the owner’s long-term goal. By generating some income from the property, owners can reduce the financial burden of paying full business rates.
Another option is to explore the possibility of appealing the rateable value of the property with the VOA or the relevant authority. If the rateable value is deemed to be incorrect or outdated, property owners may be able to secure a reduction in their business rates liability.
In conclusion, understanding and planning for the rates payable on empty commercial property is essential for property owners. Failing to do so can result in significant financial consequences, including higher costs and penalties. By being aware of the regulations and options available for managing empty properties, owners can minimize the financial burden and make more informed decisions regarding their investments.