When it comes to owning commercial property, one of the biggest concerns for property owners is the payment of business rates. Business rates are taxes that commercial property owners have to pay to the local government. They are based on the rateable value of the property and can be a significant financial burden for property owners. However, what many property owners may not realize is that even if their property is empty and not generating any income, they are still liable to pay business rates on vacant property.
The concept of business rates on vacant property can be confusing and overwhelming for many property owners. In this article, we will explore what business rates are, how they are calculated, and why property owners still have to pay them even if their property is vacant.
What are Business Rates?
Business rates are taxes that are levied on non-domestic properties in the UK. They are essentially a tax on the right to occupy commercial property. The rates are calculated based on the rateable value of the property, which is determined by the Valuation Office Agency (VOA). The VOA assesses the rental value of the property and assigns a rateable value to it. The local government then uses this rateable value to calculate the business rates that are due.
Business rates are used to fund local services such as police, fire, and education. They are collected by the local council and are a significant source of revenue for the government. Property owners are legally obliged to pay business rates on their commercial properties, whether they are occupied or vacant.
Business Rates on Vacant Property
One of the most challenging aspects of owning a commercial property is dealing with business rates on vacant property. Property owners are often surprised to learn that even if their property is empty and not generating any income, they are still required to pay business rates. This can be a significant financial burden, especially for property owners who are struggling to find tenants or who are in the process of renovating their property.
The reason property owners are still required to pay business rates on vacant property is to discourage them from leaving their properties empty for extended periods. Vacant properties can have a negative impact on the local community, attracting crime and vandalism and reducing property values in the area. By charging business rates on vacant property, the government aims to incentivize property owners to either occupy their property or rent it out to someone else.
Calculating Business Rates on Vacant Property
The calculation of business rates on vacant property is similar to the calculation for occupied properties. The rateable value of the property is still used as the basis for determining the rates that are due. However, there are some differences in how business rates are calculated for vacant properties.
Property owners whose properties have been empty for more than 3 months may be eligible for a temporary exemption from paying business rates. This is known as the empty property rate relief. The relief period varies depending on the type of property, but it is usually around 3 to 6 months for industrial properties and 6 to 12 months for offices and shops.
After the relief period has elapsed, property owners are required to pay the full business rates on their vacant property. This can be a significant financial burden, especially for property owners who are struggling to find tenants or who are facing financial difficulties.
Managing Business Rates on Vacant Property
For property owners who are struggling to pay business rates on their vacant property, there are several options available to help manage the financial burden. Property owners can apply for business rates relief or discretionary rate relief from the local council. They can also seek advice from a chartered surveyor or property consultant to explore other options for reducing their business rates liability.
In conclusion, business rates on vacant property can be a significant financial burden for property owners. Understanding how business rates are calculated and the reasons why property owners are still required to pay them on vacant properties can help property owners navigate the complex world of commercial property ownership. By exploring options for managing business rates on vacant property and seeking advice from professionals, property owners can better manage their financial obligations and protect their investments.