When it comes to owning commercial property, there are a variety of costs that business owners must contend with. One significant expense that property owners must account for are business rates, which are taxes levied on non-residential properties in the UK. These rates can have a significant impact on a business owner’s bottom line, particularly when a property sits empty. In this article, we will explore the implications of business rates on empty commercial property and provide some tips for navigating this potentially costly aspect of property ownership.
Business rates are a tax that is charged on most non-domestic properties, including shops, offices, and warehouses. The rates are calculated based on the rateable value of a property, which is determined by the Valuation Office Agency (VOA). The VOA assesses the rental value of a property and assigns a rateable value, which is then used to calculate the amount of business rates that the owner must pay.
One of the key challenges that property owners face with business rates is the burden that they place on empty properties. While most commercial properties are subject to business rates, empty commercial properties are still required to pay rates, albeit at a reduced rate. This can create a financial strain for property owners, particularly those who are unable to find tenants for their properties.
The current law states that business rates on empty commercial properties are applicable at a rate of 50% for properties with a rateable value of £2,900 or more. This rate can increase to 100% if the property has been empty for a certain period of time, typically three months for industrial properties and six months for all other types of commercial properties. These rates are designed to incentivize property owners to occupy their properties and prevent them from leaving them empty for extended periods.
The impact of business rates on empty commercial properties can be significant, particularly for small businesses and property owners who are struggling to make ends meet. Paying business rates on a property that is not generating any income can put a strain on cash flow and hinder the ability to invest in the property or seek out new tenants. In some cases, property owners may even be forced to sell their properties at a loss in order to relieve themselves of the financial burden of business rates.
However, there are some strategies that property owners can employ to mitigate the impact of business rates on empty commercial properties. One option is to take advantage of the various rate relief schemes that are available to property owners. For instance, small business rate relief is available to properties with a rateable value below a certain threshold, providing a discount on the amount of business rates owed.
Another approach is to explore the possibility of appealing the rateable value of a property with the VOA. If a property owner believes that the rateable value assigned to their property is inaccurate, they can submit an appeal to have it reassessed. A lower rateable value can result in lower business rates, helping to alleviate some of the financial strain on the property owner.
Property owners can also consider innovative ways to make use of their empty commercial properties in order to generate income and reduce the impact of business rates. For instance, properties can be rented out for temporary use as pop-up shops, event spaces, or storage facilities. By finding creative ways to utilize their properties, owners can offset some of the costs of business rates and generate additional revenue in the process.
In conclusion, business rates on empty commercial properties can pose a significant financial challenge for property owners. However, by understanding the implications of these rates and exploring options for mitigating their impact, property owners can navigate this aspect of property ownership more effectively. By taking advantage of rate relief schemes, appealing rateable values, and finding innovative ways to utilize their properties, owners can reduce the financial strain of business rates on empty commercial properties and work towards maximizing the potential of their investments.