When it comes to owning commercial property, one of the financial responsibilities that property owners must be aware of is the rates payable on empty commercial property. These rates, also known as business rates, are taxes that are levied on non-domestic properties such as offices, shops, and warehouses. The amount of rates payable on empty commercial property can vary depending on a number of factors, including the location of the property and its rateable value.
Business rates are a significant expense for property owners, and understanding how they are calculated and when they are payable is essential for managing the financial health of a commercial property. In this article, we will explore the ins and outs of rates payable on empty commercial property and provide insights on how property owners can navigate this financial obligation.
Understanding Business Rates
Business rates are a tax that is payable on non-domestic properties in the United Kingdom. The rates are calculated based on the rateable value of the property, which is determined by the Valuation Office Agency (VOA). The rateable value is an estimate of the property’s open market rental value on a specific date, known as the antecedent valuation date (AVD).
Once the rateable value of a property is determined, the local council uses a multiplier set by the government to calculate the business rates payable on the property. The multiplier is expressed in pence in the pound and is adjusted annually. It is important to note that certain types of properties, such as agricultural land and buildings used for charitable purposes, may be eligible for exemptions or reductions in business rates.
Rates Payable on Empty Commercial Property
When a commercial property is empty, property owners are still liable to pay business rates on the property. The rateable value of an empty property is based on its rental value if it were let on the open market. However, the government introduced a relief scheme in 2008 that allows property owners to claim a temporary reduction in business rates for empty properties. This scheme provides a 100% exemption from business rates for the first three months that a property is empty. After the initial three-month period, the property owner is required to pay the full business rates on the property.
It is important for property owners to be aware of the regulations surrounding rates payable on empty commercial property to avoid potential penalties or legal consequences. Failure to pay business rates on an empty property can result in legal action being taken by the local council, including the placement of a liability order on the property.
How to Manage Business Rates on Empty Commercial Property
To effectively manage business rates on empty commercial property, property owners should consider the following strategies:
1. Utilise Empty Property Relief: Property owners should take advantage of the relief scheme for empty properties to reduce their business rates liability during vacant periods. By claiming the exemption for the first three months of vacancy, property owners can minimise the financial impact of empty property rates.
2. Explore Rateable Value Appeals: Property owners who believe that the rateable value of their property is inaccurate can submit a formal appeal to the VOA. If successful, a reduction in the rateable value of the property will result in a lower business rates bill.
3. Consider Property Refurbishment: Property owners can reduce their business rates liability on empty properties by undertaking refurbishment works to make the property more attractive to potential tenants. In some cases, the VOA may reduce the rateable value of a refurbished property, resulting in lower business rates.
4. Seek Professional Advice: Property owners who are unsure about their business rates obligations or require assistance with managing rates payable on empty commercial property should seek advice from a qualified chartered surveyor or property consultant. These professionals can provide expert guidance on navigating the complexities of business rates and help property owners minimise their financial exposure.
Conclusion
rates payable on empty commercial property are a significant financial obligation for property owners. Understanding how business rates are calculated, when they are payable, and how to manage them effectively is essential for maintaining the financial health of a commercial property. By utilising the relief schemes available, exploring rateable value appeals, undertaking property refurbishment, and seeking professional advice, property owners can navigate the complexities of rates payable on empty commercial property and mitigate their financial impact.