Vacant business rates, often referred to as empty property rates, can be a significant financial burden for businesses that have unused or unoccupied commercial properties. These rates are a form of tax that commercial property owners must pay to local authorities when their properties are vacant. In this article, we will delve into the details of vacant business rates, how they are calculated, and what steps businesses can take to minimize the impact of these charges.
What Are vacant business rates?
Vacant business rates are levied on commercial properties that are empty for an extended period of time. These rates were introduced by the UK government to discourage property owners from leaving their properties vacant and to incentivize them to bring their properties back into productive use. The rates are charged by local authorities and are based on the rateable value of the property.
The rateable value of a property is determined by the Valuation Office Agency and is used to calculate the business rates that property owners must pay. When a property becomes vacant, it is subject to a 100% empty property rate for the first three months. After this initial period, the rate drops to 50% of the full rate for most commercial properties. However, some properties may be exempt from paying empty property rates, such as industrial properties, properties with a rateable value of less than £2,900, and properties owned by charities or community amateur sports clubs.
How Are vacant business rates Calculated?
Vacant business rates are calculated based on the rateable value of the property and the length of time it has been vacant. For properties that have been empty for more than three months, the rateable value is multiplied by the appropriate multiplier set by the government. The multiplier for empty property rates is usually half of the standard non-domestic rate multiplier.
For example, if a property has a rateable value of £20,000 and has been vacant for six months, the annual vacant business rates would be calculated as follows:
Rateable value: £20,000
Multiplier: 0.5
Annual vacant business rates: £20,000 x 0.5 = £10,000
It is important to note that property owners are still liable to pay vacant business rates even if they are actively marketing the property for rent or sale. However, there are certain exemptions and reliefs available that property owners can apply for to reduce or eliminate the amount of vacant business rates they have to pay.
Minimizing the Impact of vacant business rates
There are several strategies that businesses can employ to minimize the impact of vacant business rates on their finances. One option is to seek relief or exemptions for the property. In some cases, properties that are undergoing major renovation or repair work may be eligible for a temporary exemption from empty property rates. Property owners may also be able to apply for relief if they can demonstrate that they are actively marketing the property for rent or sale.
Another option is to consider alternative uses for the property while it is vacant. For example, property owners could explore the possibility of renting out the property for short-term events or pop-up shops to generate income and reduce the amount of vacant business rates they have to pay. Alternatively, property owners could consider subdividing the property into smaller units to attract a wider range of tenants.
Property owners may also want to consider negotiating with local authorities to revalue the property if they believe the rateable value is too high. By providing evidence of changes in the local property market or the condition of the property, property owners may be able to achieve a lower rateable value and reduce their vacant business rates liability.
In conclusion, vacant business rates can be a significant financial burden for businesses with empty commercial properties. Property owners should be aware of how these rates are calculated and explore all available options to minimize the impact of vacant business rates on their finances. By taking proactive steps and seeking relief or exemptions where possible, businesses can effectively manage the costs associated with vacant commercial properties.