Vacant business rates, often referred to simply as empty rates, are a significant concern for property owners and investors. These rates are a tax imposed by local councils on commercial properties that are not occupied or being used for business purposes. The aim of the tax is to discourage property owners from leaving their properties vacant for extended periods of time, thus promoting economic activity and growth in the area.
Vacant business rates can be a significant financial burden for property owners, especially during times of economic uncertainty or when a property has been vacant for an extended period. It is important for property owners and investors to understand how vacant business rates are calculated, how they can be reduced or avoided, and what steps can be taken to minimize the impact of these rates on their bottom line.
Calculating vacant business rates
Vacant business rates are calculated based on the rateable value of the property, which is determined by the Valuation Office Agency (VOA). The rateable value is an estimate of the annual rental value of the property as of a certain date, usually determined every five years. The local council then applies a multiplier to this rateable value to determine the actual amount of vacant business rates that must be paid.
In England and Wales, properties that have been vacant for three months or more are subject to 100% of the standard business rates, which can be a considerable expense for property owners. In Scotland, properties that have been vacant for more than six months are subject to 90% of the standard business rates, while in Northern Ireland, properties that have been vacant for more than three months are subject to 50% of the standard business rates.
Reducing or Avoiding vacant business rates
There are several strategies that property owners and investors can use to reduce or avoid vacant business rates. One common approach is to seek temporary tenants or short-term leases for the property, even if it is not the ideal long-term solution. By doing so, the property is no longer considered vacant and may be eligible for a reduced rate or exemption from vacant business rates.
Another option is to apply for an exemption from vacant business rates if the property is undergoing major repair or renovation works. Properties that are being refurbished or undergoing structural alterations may be eligible for a temporary exemption from vacant business rates for a period of up to three months in England and Wales, or six months in Scotland.
Property owners can also consider demolishing or converting the property to a different use in order to avoid vacant business rates. By obtaining planning permission for a change of use or applying for a demolition order, property owners may be able to significantly reduce the amount of vacant business rates they are required to pay.
Minimizing the Impact of vacant business rates
While vacant business rates can be a significant financial burden for property owners, there are ways to minimize their impact and protect the value of the property. One strategy is to actively market the property for sale or lease, in order to attract potential tenants or buyers and reduce the amount of time the property remains vacant.
Property owners can also consider negotiating with the local council to request a reduction in the amount of vacant business rates that must be paid. In some cases, councils may be willing to offer a discretionary rate relief or grant a temporary exemption, especially if the property is in a disadvantaged area or undergoing significant economic challenges.
In conclusion, vacant business rates can pose a significant financial burden for property owners and investors, especially during times of economic uncertainty or when a property remains empty for an extended period. By understanding how these rates are calculated, exploring strategies to reduce or avoid them, and taking steps to minimize their impact, property owners can better protect their bottom line and preserve the value of their investments.