When it comes to owning commercial property, there are many expenses that landlords need to consider. One of the costs that often catches property owners off guard is business rates on vacant property. This is a tax that is levied on non-residential properties that are empty for an extended period of time. In this article, we will explore what business rates on vacant property are, how they are calculated, and what landlords can do to minimize this expense.
business rates on vacant property are a tax that is payable on most non-residential properties in the UK. These rates are collected by local authorities and are used to fund local services such as schools, libraries, and waste collection. The purpose of this tax is to ensure that all property owners contribute to the cost of providing these services, regardless of whether their property is occupied or not.
The amount of business rates payable on a vacant property is calculated based on the rateable value of the property. This value is determined by the Valuation Office Agency (VOA), an agency of HM Revenue and Customs, and reflects the rental value of the property as of a specific date. The rateable value is then used to calculate the annual business rates bill for the property.
In most cases, business rates on vacant property are charged at a rate of 50% of the normal bill for the first three months that the property is empty. After this initial period, the rates increase to the full amount. This means that landlords of vacant properties can face significant financial implications if their properties remain unoccupied for an extended period of time.
There are, however, some exemptions and reliefs available to landlords of vacant properties. For example, properties that are undergoing major repairs or structural changes may be eligible for a 100% exemption from business rates for a limited period of time. Additionally, properties that are newly built and have not yet been occupied may also be entitled to relief from business rates.
Landlords who are struggling to pay business rates on their vacant properties may also be able to apply for hardship relief. This is a discretionary relief that is granted by local authorities on a case-by-case basis. Landlords must be able to demonstrate that they are experiencing financial hardship and that paying the full amount of business rates would cause them undue financial distress.
In some cases, landlords may be able to reduce their business rates bill by taking steps to actively market their vacant property. Local authorities may grant a temporary exemption from business rates for properties that are actively being marketed for sale or rent. This exemption typically lasts for 12 months and can provide landlords with some much-needed financial relief.
Another option for landlords looking to reduce their business rates bill is to consider leasing their property on a short-term basis. By doing so, landlords can avoid paying business rates on the property while still generating some income. Short-term leases can also help to attract potential long-term tenants by showcasing the property’s potential and generating interest in the space.
In conclusion, business rates on vacant property can be a significant expense for landlords, but there are ways to minimize this cost. By understanding how business rates are calculated and exploring the exemptions and reliefs available, landlords can take steps to reduce their financial burden. Active marketing, short-term leasing, and hardship relief are all options that landlords can consider when faced with high business rates on their vacant properties. By taking proactive measures, landlords can effectively manage this expense and ensure that their properties remain financially viable in the long run.