Empty commercial properties can present a challenge to property owners and investors, particularly when it comes to business rates. These rates are imposed by local authorities on all non-domestic properties, including empty commercial buildings. The issue of business rates on empty commercial property is a complex one, with significant financial implications for property owners. In this article, we will delve into the impact of business rates on empty commercial property and explore strategies for navigating this challenge.
Business rates are a tax imposed by local authorities in the UK on most non-domestic properties, including shops, offices, warehouses, and factories. These rates are calculated based on the rateable value of the property, which is determined by the Valuation Office Agency (VOA). The rateable value is a measure of the property’s rental value as of a certain date, known as the valuation date. Business rates are a significant source of revenue for local authorities and are used to fund essential services such as schools, roads, and infrastructure.
When a commercial property becomes empty, the owner is still liable to pay business rates on the property. This can present a financial burden for property owners, particularly if the property remains vacant for an extended period. In some cases, the business rates on an empty property can exceed the rental income that the property would generate if it were occupied. This can put pressure on property owners and investors, leading to financial strain and a reluctance to invest in empty properties.
There are certain exemptions and reliefs available for empty commercial properties when it comes to business rates. Under current legislation, most commercial properties are exempt from paying business rates for the first three months that they are empty. After this initial three-month period, the property owner is required to pay the full business rates unless they qualify for an exemption or relief. Some properties may be eligible for additional reliefs, such as small business rates relief or charitable relief, which can reduce the amount of business rates payable on the property.
One common strategy employed by property owners to mitigate the impact of business rates on empty commercial property is to seek temporary occupation of the property. By temporarily occupying the property with a short-term tenant or pop-up shop, property owners can qualify for a 100% exemption from business rates for up to three months. This can provide a temporary reprieve from the financial burden of paying business rates on an empty property and reduce the overall cost of ownership.
Another option for property owners is to consider refurbishing or redeveloping the empty commercial property to make it more attractive to potential tenants. By improving the condition and amenities of the property, property owners can increase the likelihood of finding a tenant and generating rental income. This not only helps to offset the cost of business rates but also improves the overall value and appeal of the property. Property owners can also explore alternative uses for the property, such as converting office space into residential accommodation or repurposing a warehouse as a creative workspace.
In some cases, property owners may choose to appeal the rateable value of their empty commercial property in order to reduce the amount of business rates payable. The rateable value is determined by the VOA based on the rental value of the property, but property owners can challenge this valuation if they believe it to be incorrect. By submitting an appeal and providing evidence to support their case, property owners can potentially reduce the rateable value of the property and lower the amount of business rates payable.
Overall, the impact of business rates on empty commercial property can be significant for property owners and investors. However, by exploring exemptions and reliefs, seeking temporary occupation, refurbishing or redeveloping the property, and appealing the rateable value, property owners can navigate this challenge and make the most of their investment. With careful planning and strategic decision-making, property owners can minimize the financial burden of business rates on empty commercial property and unlock the potential of their real estate assets.