Business rates are a tax levied on non-residential properties in the UK, including shops, offices, and warehouses. These rates are based on the rateable value of the property, which is set by the government and revaluated every few years. While business rates are an essential source of income for local authorities, they can often be a significant financial burden for businesses, particularly when a property is vacant. In such cases, businesses may still be liable to pay void business rates.
void business rates refers to the business rates that are due on empty commercial properties. The rationale behind charging void business rates is to prevent property owners from keeping buildings empty to avoid paying rates altogether. This practice, known as “rate avoidance,” can have negative consequences for local economies, as empty properties can contribute to urban blight and discourage investment in the area.
Business rates are calculated based on the rateable value of a property, which is determined by the Valuation Office Agency (VOA). The rateable value is an estimate of the property’s open market rental value as of a specific date. In England, the rateable value is reassessed every five years, while in Wales, the revaluation period is every three years.
When a property becomes vacant, the owner is still liable to pay business rates unless they are eligible for a temporary exemption. The length of the exemption period varies depending on the type of property and the circumstances of the vacancy. For example, newly constructed properties are exempt from business rates for the first three months after completion. After the exemption period expires, the owner is required to pay the full business rates unless they qualify for additional reliefs.
One of the common misconceptions about void business rates is that they are automatically exempted when a property is empty. However, this is not the case, and property owners must inform their local council of the vacancy to avoid being charged the full rates. Failure to notify the council of a property vacancy can result in penalties and backdated charges, adding to the financial strain on businesses.
There are several ways in which businesses can mitigate the impact of void business rates. One option is to apply for the Empty Property Rate Relief, which provides a 100% discount on business rates for the first three months that a property is vacant. After the initial three-month period, the discount is reduced to 50% for most properties, although certain types of properties may be eligible for extended relief.
Another option for reducing void business rates is to actively market the property for rent or sale. By demonstrating that efforts are being made to fill the vacant property, owners may be able to qualify for additional reliefs or exemptions. Local councils may also consider granting discretionary relief in cases where the property has been vacant for an extended period due to circumstances beyond the owner’s control.
In some cases, property owners may consider demolishing or repurposing a vacant building to avoid paying void business rates. However, these options can be costly and may not always be feasible, especially for historically significant buildings or properties in conservation areas. Working with local authorities and exploring alternative uses for the property may be a more viable solution in such cases.
Overall, void business rates are an important consideration for property owners and businesses alike. Understanding the rules and regulations surrounding void business rates can help businesses avoid unnecessary financial burdens and ensure compliance with the law. By taking proactive steps to manage vacant properties and explore potential relief options, businesses can minimize the impact of void business rates on their bottom line and contribute to the revitalization of their local communities.