When it comes to owning commercial property, one of the biggest challenges that landlords face is dealing with business rates on vacant properties. These rates can be a significant financial burden, especially for property owners who are struggling to find tenants or are in between leases. Understanding how business rates on vacant property work and what options are available can help landlords navigate this complex aspect of property ownership.
Business rates are a tax on non-residential properties that are used to fund local services such as schools, roads, and waste management. The amount of business rates that a property owner must pay is determined by the rateable value of the property, which is set by the Valuation Office Agency (VOA). The rateable value is based on the rental value of the property as of a specific date, known as the valuation date.
When a commercial property becomes vacant, the owner is still required to pay business rates on the property unless they qualify for an exemption. The government has implemented a few measures to help property owners mitigate the financial impact of business rates on vacant properties. One such measure is the Empty Property Relief, which provides a 100% exemption on business rates for the first three months that a property is vacant. After the initial three-month period, the property owner is required to pay the full amount of business rates unless they qualify for additional relief.
In some cases, property owners may be able to apply for further relief under the Unoccupied Property Rates Relief scheme. This scheme provides a 50% discount on business rates for properties that have been vacant for more than three months that are not exempt from paying rates. However, it’s important to note that each local authority has its own guidelines and criteria for granting relief under this scheme, so property owners should consult with their local council to understand their options.
Another option for property owners struggling with business rates on vacant properties is to consider restructuring the property to make it more attractive to potential tenants. This could involve making improvements or renovations to the property to increase its rental value and make it more marketable. While this approach may require an initial investment, it could help landlords attract tenants more quickly and ultimately offset the cost of business rates on the property.
Alternatively, property owners can explore the option of letting the property out on a short-term basis to generate income and reduce the financial burden of business rates on vacant property. Short-term leases, also known as pop-up leases, can be a great way to generate revenue while landlords search for a long-term tenant. This approach can also provide property owners with an opportunity to test the market and see if there is interest in the property from potential tenants.
It’s worth noting that there are certain circumstances under which property owners may be eligible for a complete exemption from paying business rates on vacant properties. For example, properties with a rateable value of under £2,900 are exempt from paying business rates, regardless of whether they are occupied or vacant. Additionally, properties that are undergoing major structural repairs or alterations may be eligible for a temporary exemption from paying business rates.
Overall, navigating business rates on vacant property can be a complex and challenging task for landlords. Understanding the various relief options available and exploring creative solutions, such as restructuring the property or leasing it out on a short-term basis, can help property owners alleviate the financial burden of business rates on vacant properties. By staying informed and proactive, landlords can effectively manage their business rates and maximize the potential of their commercial properties.