When it comes to owning or leasing a commercial property, one of the often overlooked costs that can catch businesses off guard is business rates. These rates are charged on most non-domestic properties, including shops, offices, warehouses, and factories. However, what many business owners may not be aware of is that business rates are still applicable even on unoccupied premises. In this article, we will delve into the intricacies of business rates on unoccupied premises and what businesses need to know to avoid any surprises.
Business rates are a tax levied by local authorities in England, Scotland, and Wales to help fund local services. The amount a business pays in business rates is determined by the rateable value of the property, which is assessed by the Valuation Office Agency (VOA). The rateable value is based on the rental value of the property at a specific date and is revalued every five years to reflect changes in the property market.
One common misconception among business owners is that they do not have to pay business rates on unoccupied premises. However, this is not entirely true. While there are some exemptions and reliefs available for empty properties, business rates are still applicable on most unoccupied premises.
In England, if a property is unoccupied for more than three months, business rates will be payable at a reduced rate of 50% for the first three months and then at the full rate thereafter. This is known as the empty property rate. The idea behind this policy is to incentivize property owners to bring vacant premises back into use and prevent properties from lying empty for extended periods.
In Scotland, unoccupied commercial properties are exempt from paying business rates for the first three months. After this initial period, owners of unoccupied properties are required to pay 90% of the full business rates. In Wales, the rules are similar to those in England, with a 50% reduction for the first three months and full rates thereafter.
It is important for businesses to be aware of the implications of leaving a property unoccupied for an extended period. Not only will they be liable to pay business rates on the property, but leaving a property empty also means missing out on potential rental income or business opportunities.
There are, however, some exemptions and reliefs available for certain types of properties. For example, newly built properties are exempt from paying business rates for the first 18 months after they are completed. Listed buildings and properties with a rateable value of less than £2,900 are also eligible for 100% rate relief.
Business owners can also apply for temporary relief if they are carrying out renovations or repairs on their property that render it temporarily uninhabitable. This relief can be granted for up to three months, with a possible extension of another three months in exceptional circumstances.
If a property remains unoccupied for an extended period and the local authority deems it to be a blight on the community, they have the power to levy a higher rate of business rates on the property. This is known as the long-term empty property premium and can be up to 200% of the standard business rates.
In recent years, there has been increasing scrutiny of the impact of business rates on small businesses, particularly in the retail sector. The rise of online shopping and changing consumer habits have led to many high street shops closing down, leaving behind a trail of empty premises. The burden of paying business rates on these unoccupied properties has been cited as one of the reasons why some businesses are struggling to survive.
In response to these concerns, the government has introduced various measures to help alleviate the pressure on businesses. Small businesses with a rateable value of less than £12,000 are eligible for 100% rate relief, while those with a rateable value between £12,000 and £15,000 receive tapered relief.
Overall, business rates on unoccupied premises can be a significant financial burden for businesses, especially during times of economic uncertainty. It is important for businesses to be aware of their obligations and take advantage of any reliefs and exemptions that may be available to them. By understanding the implications of business rates on unoccupied premises, businesses can make informed decisions about their property portfolio and mitigate any potential financial risks.