empty rates commercial property, also known as business rates, can be a significant financial burden for property owners. These rates are essentially a tax on non-domestic properties, including commercial properties like shops, offices, warehouses, and factories. When a commercial property is empty, the owner is still required to pay business rates unless they qualify for an exemption. In this article, we will discuss what empty rates are, how they are calculated, exemptions available, and tips for property owners to reduce their empty rates liability.
Empty rates are a tax levied by local authorities in the UK to fund local services. They are based on the rateable value of a property, which is calculated by the Valuation Office Agency. The rateable value represents the estimated rental value of the property on a set date, known as the antecedent valuation date (AVD). Business rates are calculated by multiplying the rateable value of the property by the national non-domestic multiplier, which is set by the government each year.
When a commercial property becomes empty, the property owner is still required to pay business rates for the first three months of vacancy. After this initial three-month period, the property owner is eligible for a 100% exemption for a further three months for most properties, and for industrial properties, the exemption is extended to six months. However, after this initial exemption period, the property owner is required to pay the full business rates unless they qualify for an additional exemption.
There are several exemptions available for empty rates commercial property. Small Business Rate Relief may apply if the rateable value of the property is below a certain threshold. Properties that are undergoing refurbishment or structural alterations may qualify for an exemption for up to 12 months. Properties that are considered uninhabitable due to major works may also be exempt from business rates. Additionally, properties that are classified as exempt from business rates for other reasons, such as listed buildings or agricultural land, may also be exempt when empty.
Property owners can take several steps to reduce their empty rates liability. One option is to actively market the property for rent or sale, as properties that are actively being marketed are eligible for a 50% discount on empty rates. Additionally, property owners can consider negotiating a temporary or short-term lease agreement with a tenant to avoid empty rates liability. This option can help generate income while the property is vacant and may also make the property more attractive to potential long-term tenants.
Another strategy to reduce empty rates liability is to consider using the property for alternative purposes. For example, property owners could explore converting the property for temporary use as a pop-up shop, gallery, or events space. This can help generate income and attract foot traffic to the property while it is vacant. Property owners can also consider seeking advice from a rating specialist or property consultant to explore other options for reducing empty rates liability.
In conclusion, empty rates commercial property can be a significant financial burden for property owners. Understanding how empty rates are calculated, the exemptions available, and strategies for reducing empty rates liability can help property owners navigate this challenging aspect of property ownership. By actively marketing the property, negotiating short-term lease agreements, exploring alternative uses for the property, and seeking professional advice, property owners can effectively manage their empty rates liability and minimize financial impact.