Commercial properties are a significant investment for many business owners and investors. However, there are certain costs and expenses associated with owning and maintaining these properties, one of which is the rates payable on empty commercial property. In this article, we will explore what rates are, why they are payable on empty commercial properties, and what owners can do to minimize these costs.
Rates, also known as business rates or non-domestic rates, are a tax levied on non-residential properties in the UK. These rates contribute to the funding of local services such as education, waste management, and road maintenance. The amount of rates payable is determined by the rateable value of the property, which is based on the property’s estimated open market rental value as of April 2015.
One of the most common misconceptions about rates is that they are only payable on occupied properties. However, rates are also payable on empty commercial properties. This means that owners are required to pay rates even when their properties are vacant and not generating any income. The rationale behind this is to discourage property owners from leaving their properties empty for extended periods.
The rates payable on empty commercial properties can add up to a significant cost for owners, especially if the property remains vacant for a long time. In the first three months that a property is empty, owners are exempt from paying rates. However, after this initial three-month period, they are required to pay the full rates as if the property were occupied.
To help owners cope with the financial burden of rates on empty properties, the government introduced several relief schemes. One of the most common relief schemes is the Empty Property Rates Relief, which provides a 100% discount on rates for the first three months that a property is empty. After the initial three-month period, owners can apply for various types of relief based on the circumstances of their property.
For instance, properties undergoing significant renovation or structural alterations may be eligible for the Empty Property Rates Relief. This relief provides a 100% discount on rates for up to 12 months or until the property is reoccupied, whichever comes first. Owners must provide evidence of the ongoing renovation works to qualify for this relief.
Another relief scheme is the Small Business Rate Relief, which provides a 100% discount on rates for properties with a rateable value below a certain threshold. This relief is targeted at small businesses and startups that are struggling to cover the costs of owning a commercial property, including rates on empty properties.
In addition to relief schemes, owners of empty commercial properties can take proactive steps to minimize their rates payable. One strategy is to explore alternative uses for the property, such as temporary rentals or pop-up shops. By allowing short-term leases or licenses, owners can generate some income from the property while they search for long-term tenants.
Owners can also consider applying for charitable relief if the property is used for charitable purposes. Charities and community amateur sports clubs are eligible for an 80% discount on rates, which can help offset the costs of owning an empty commercial property.
Furthermore, owners can appeal the rateable value of their property if they believe it is inaccurate. By providing evidence of recent rental transactions or other relevant factors, owners can request a revaluation of their property, which may result in a lower rateable value and reduced rates payable.
In conclusion, rates payable on empty commercial properties can be a significant financial burden for owners. However, by understanding the relief schemes available, exploring alternative uses for the property, and appealing the rateable value if necessary, owners can take steps to minimize these costs. Ultimately, it is essential for owners to be proactive in managing their rates payable to ensure the long-term financial sustainability of their commercial properties.