When it comes to owning or leasing commercial property, one of the significant expenses that business owners need to consider is the business rates imposed on empty property. This additional cost can have a significant impact on businesses, especially during times of economic uncertainty or downturns. In this article, we will explore the reasons behind business rates on empty property and how it can affect businesses.
business rates on empty property, also known as empty property rates, are a tax imposed by the local government on commercial properties that are unoccupied. The purpose of this tax is to incentivize property owners to either use or rent out their empty properties, thus ensuring that commercial spaces are being utilized efficiently.
One of the main reasons why business rates are imposed on empty property is to prevent property owners from leaving their properties vacant for extended periods without any intention of utilizing or leasing them out. By imposing this tax, local authorities aim to encourage property owners to actively seek tenants for their vacant spaces or consider alternative uses for the property.
The amount of business rates imposed on empty property is calculated based on the rateable value of the property. Rateable values are determined by the Valuation Office Agency (VOA) and are used to calculate the amount of business rates that a property owner needs to pay. The rates are typically charged at a percentage of the rateable value, with different rates imposed depending on the length of time the property has been empty.
For example, in the UK, business rates on empty property are charged at 100% of the full rate after the property has been empty for three months for industrial properties and six months for office and retail properties. This means that property owners need to pay the full amount of business rates on their empty properties if they remain vacant for an extended period.
The impact of business rates on empty property can be significant for businesses, especially small and medium-sized enterprises (SMEs) that may struggle to afford these additional costs. During economic downturns or periods of uncertainty, businesses may find it challenging to attract tenants for their vacant properties, leading to an increase in the amount of business rates they need to pay.
Furthermore, the imposition of business rates on empty property can discourage property owners from investing in or developing their properties, as they may be hesitant to incur additional costs if they are unable to find tenants. This can result in vacant properties remaining unutilized for extended periods, contributing to a decrease in economic activity and the overall attractiveness of the area.
There are, however, exemptions and reliefs available for certain types of properties when it comes to business rates on empty property. For example, newly built properties are exempt from paying business rates for the first three months after completion, allowing property owners some time to find tenants. Additionally, charities and community amateur sports clubs may be eligible for 80% relief on business rates for their empty properties.
In some cases, property owners may be able to apply for hardship relief if they can demonstrate that the imposition of business rates on their empty property would cause them significant financial hardship. Local authorities have the discretion to grant relief on a case-by-case basis, taking into account the circumstances of the property owner and the reasons behind the property remaining vacant.
In conclusion, business rates on empty property can have a significant impact on businesses, particularly during times of economic uncertainty. Property owners need to be aware of the implications of leaving their commercial properties vacant for extended periods and the additional costs they may incur as a result. By understanding the reasons behind business rates on empty property and exploring the exemptions and reliefs available, property owners can better navigate this aspect of property ownership and management.