Business rates are a tax on non-domestic properties in the UK, including shops, offices, factories, and warehouses. However, one contentious issue that often arises is how these rates are applied to empty properties. In this article, we will explore the impact of business rates on empty property.
When a property becomes vacant, the owner is still liable to pay business rates. This is because the property is still considered to have a commercial value, even if it is not currently generating any income. The logic behind this is that the property still benefits from local services and infrastructure, such as roads, street lighting, and waste disposal, which the local authority provides and maintains.
Paying business rates on an empty property can be a significant financial burden for property owners. In some cases, the rates can be as much as 50% of the property’s rateable value. This can make it difficult for owners to find tenants or buyers for their empty properties, as they have to factor in the additional cost of business rates when setting the rent or selling price.
There are some exemptions and reliefs available for empty properties, but these are limited and often come with strict criteria. For example, properties that are undergoing renovation or are in a state of disrepair may qualify for a temporary exemption from business rates, but this is usually only for a set period of time. Similarly, properties that are part of a larger development scheme may be eligible for relief, but only if certain conditions are met.
The issue of business rates on empty properties has become even more prominent in recent years, as the high street retail sector continues to struggle. Many shops and other commercial properties are sitting vacant, as businesses close down or move online. This has led to calls for reform of the business rates system, to make it fairer for property owners and to encourage investment in empty properties.
One potential solution that has been proposed is to introduce a new system of “self-assessment” for business rates on empty properties. Under this system, owners would be able to declare the true rental value of their property when it is vacant, rather than having to pay rates based on the property’s rateable value. This would make it easier for owners to attract tenants or buyers, as they would not be burdened with high business rates from the outset.
Another option is to introduce a “vacant property credit” for owners of empty properties. This would offset a percentage of the business rates that are due on the property, based on how long it has been vacant. This would provide some financial relief for owners and encourage them to actively market their properties, rather than leaving them empty and unused.
Of course, any changes to the business rates system would need to be carefully considered, to ensure that they are fair and workable for all parties involved. The government has already announced plans to review the current system of business rates, with a view to making it more responsive to changes in the property market.
In conclusion, business rates on empty properties can be a major issue for property owners, particularly in the current economic climate. The high cost of rates can deter investment in empty properties and make it harder for owners to find tenants or buyers. However, there are potential solutions, such as self-assessment and vacant property credits, that could help to mitigate the impact of business rates on empty properties. It will be interesting to see how the government’s review of the business rates system unfolds and whether any changes are made to address this issue.