Are you a property owner with vacant space? If so, you may be familiar with the concept of business rates on vacant property. Business rates are taxes that are paid on non-residential properties in the UK, and vacant properties are not exempt from these charges. In this article, we will explore what business rates on vacant property are, how they are calculated, and what steps property owners can take to minimize these costs.
Business rates are annual taxes that are levied on non-domestic properties such as shops, offices, warehouses, and other commercial spaces. These rates are charged by local authorities and are used to fund local services such as roads, schools, and waste disposal. The amount of business rates charged on a property is based on its rateable value, which is determined by the Valuation Office Agency (VOA). The rateable value is an estimate of the yearly rental value of a property at a given date.
When a property becomes vacant, the owner is still liable to pay business rates on that property. This is because the property still benefits from local services and infrastructure, even if it is not being actively used for business purposes. The only exception to this rule is if the property is exempt from business rates under certain circumstances, such as if it is a listed building or if it is too small to qualify for rates.
The rateable value of a property is used to calculate the amount of business rates that are due. The current standard multiplier for business rates in England is 51.2p for small businesses and 49.9p for larger businesses. This multiplier is applied to the rateable value of the property to determine the annual amount of rates owed. For example, a property with a rateable value of £20,000 would owe £10,240 in business rates annually at the standard multiplier rate.
Property owners may be concerned about the financial burden of paying business rates on a vacant property, especially if they are not generating any income from that property. However, there are steps that property owners can take to reduce their business rates liability. One option is to apply for a temporary exemption on the property if it is undergoing major renovations or repairs. This exemption can last for up to three months, with the possibility of an extension in certain circumstances.
Another option is to apply for a hardship relief if the property owner is experiencing financial difficulties and is struggling to pay the business rates. Local authorities have the discretion to grant relief on a case-by-case basis, taking into account the financial situation of the property owner. Property owners can also consider leasing out the vacant space to a charity or community organization, as these types of tenants may be eligible for a 80% discount on business rates.
Property owners should also be aware of the risks of leaving a property vacant for extended periods of time. Vacant properties can attract vandalism, squatting, and other criminal activities, which can have a negative impact on the value of the property. In addition, local authorities have the power to charge an additional premium on properties that have been vacant for more than two years. This premium is set at 200% of the normal business rates liability and is intended to incentivize property owners to bring their vacant properties back into use.
In conclusion, business rates on vacant property are a necessary expense for property owners, even if their properties are not currently being used for business purposes. However, there are steps that property owners can take to minimize their business rates liability, such as applying for exemptions, relief, or discounts. Property owners should also be mindful of the risks of leaving a property vacant for too long, as this can result in additional costs and potential damage to the property. By staying informed about their obligations and options, property owners can navigate the world of business rates on vacant property with confidence.