Void business rates, also known as empty property rates, are a significant concern for many business owners. When a commercial property becomes vacant, the owners are still required to pay business rates on the empty space. This additional financial burden can create challenges for businesses, particularly those struggling after the impact of the COVID-19 pandemic.
In this article, we will delve deeper into void business rates, explaining what they are, why they exist, and what businesses can do to mitigate the costs.
What Are void business rates?
Void business rates are a tax levied on commercial properties that are unoccupied for an extended period. In the United Kingdom, business rates are charged on most commercial properties, including shops, offices, warehouses, and factories. The amount of business rates payable is determined by the rateable value of the property, which is assessed by the Valuation Office Agency (VOA).
When a commercial property becomes vacant, the responsibility for paying business rates falls on the property owner. This means that even if a business moves out of the premises or the property is awaiting a new tenant, the owner will still be liable for the void business rates.
Why Do void business rates Exist?
Void business rates are intended to incentivize property owners to keep their properties occupied. By imposing a financial penalty on vacant properties, local councils aim to encourage landlords to find tenants quickly and minimize the number of empty buildings in the area.
However, critics argue that void business rates can hinder economic growth and harm businesses, especially during challenging times such as recessions or market downturns. The burden of paying business rates on empty properties can significantly impact landlords’ finances and deter investment in commercial real estate.
What Can Businesses Do to Mitigate void business rates?
Managing void business rates can be a complex and costly process for businesses, especially during periods of economic uncertainty. However, there are some strategies that landlords and property owners can employ to minimize the impact of void business rates on their bottom line:
1. Exemptions and Relief: In some cases, property owners may be eligible for exemptions or relief from void business rates. For example, properties undergoing major refurbishment or redevelopment may qualify for a temporary exemption from business rates. Similarly, properties with a rateable value below a certain threshold may be entitled to small business rate relief.
2. Negotiate with the Local Council: Property owners facing financial difficulties due to void business rates may consider negotiating with the local council for a reduction or deferment of payments. Councils may be willing to offer flexibility if the property owner can demonstrate genuine hardship or provide evidence of efforts to market the property.
3. Temporary Use: Instead of leaving a property completely empty, landlords may explore temporary uses such as pop-up shops, seasonal markets, or community events. By activating the space and attracting temporary tenants, property owners can generate some income and potentially qualify for relief from void business rates.
4. Renting Out the Property: The most effective way to avoid void business rates is to secure a new tenant for the vacant property. Property owners should actively market the space, negotiate competitive lease terms, and offer incentives to attract potential tenants. By securing a new occupant, landlords can not only avoid void business rates but also generate rental income.
5. Seek Professional Advice: Dealing with void business rates can be complex, and property owners may benefit from seeking professional advice from tax advisors, surveyors, or property consultants. These experts can provide guidance on mitigating void business rates, navigating the business rates appeals process, and maximizing the value of the property.
Conclusion
Void business rates are a significant concern for property owners, particularly in the current economic climate. The financial burden of paying business rates on empty properties can create challenges for businesses seeking to recover from the impact of the COVID-19 pandemic.
By understanding the implications of void business rates and implementing proactive strategies to mitigate the costs, property owners can navigate this challenging landscape and safeguard their financial interests. Whether through exemptions and relief, negotiation with local councils, temporary use of the property, renting out the space, or seeking professional advice, businesses can take proactive steps to minimize the impact of void business rates on their bottom line.