business rates on vacant property, often a headache for property owners and investors, are an important aspect of property ownership that is often misunderstood. In this article, we will discuss what business rates on vacant property are, how they are calculated, how they are affected by changes in legislation, and what property owners and investors can do to minimize their impact.
Business rates are taxes that are levied on non-domestic properties in the United Kingdom. They are based on the rateable value of a property, which is determined by the Valuation Office Agency (VOA). The rateable value represents the annual rental value of the property if it were available for rent on the open market. Business rates are a significant source of revenue for local authorities and are used to fund local services such as schools, roads, and waste collection.
business rates on vacant property, also known as empty property rates, are a specific type of business rates that are levied on properties that are empty and not in use. These rates are intended to discourage property owners from leaving properties empty for extended periods of time and to incentivize them to bring vacant properties back into use. However, for property owners and investors, business rates on vacant property can be a significant financial burden, especially during times when rental demand is low or when properties are undergoing renovations.
The calculation of business rates on vacant property is based on the rateable value of the property and the specific rules set out in the relevant legislation. In England, the Local Government Finance Act 1988 sets out the rules for calculating business rates on vacant property. Under these rules, most properties are exempt from business rates for the first three months that they are empty. After three months, business rates on vacant property are charged at 50% of the full rateable value for properties with a rateable value of more than £2,900.
In April 2020, the government introduced temporary relief measures for business rates on vacant property in response to the COVID-19 pandemic. These measures included a 100% exemption from business rates for properties that were empty in the 2020/2021 financial year and a 50% exemption for properties that were empty in the 2021/2022 financial year. These relief measures were intended to help property owners and investors who were struggling financially as a result of the pandemic and to encourage them to keep their properties occupied.
However, it is important for property owners and investors to be aware that these relief measures are temporary and are scheduled to expire in March 2023. When these relief measures expire, property owners will once again be liable for business rates on vacant property at the full rateable value. This means that property owners and investors should start planning now for the end of these relief measures and take steps to minimize the impact of business rates on vacant property on their finances.
One option for property owners and investors looking to reduce their liability for business rates on vacant property is to consider leasing their properties on short-term agreements. By leasing a property on a short-term basis, property owners can avoid liability for business rates on vacant property as long as the property is occupied, even if the occupancy is only temporary. Short-term leases can also provide property owners with a steady income stream and allow them to maintain control over their properties while also reducing their liability for business rates.
Another option for property owners and investors is to consider redeveloping their vacant properties to bring them back into use. By refurbishing or repurposing a vacant property, property owners can not only generate income from the property but also increase its rateable value, which can in turn reduce the amount of business rates that they are liable for. Redevelopment can be a costly and time-consuming process, but for property owners looking to maximize the potential of their vacant properties, it can be a worthwhile investment.
In conclusion, business rates on vacant property are an important aspect of property ownership that property owners and investors need to be aware of. Understanding how business rates on vacant property are calculated, how they are affected by changes in legislation, and what steps can be taken to minimize their impact can help property owners and investors to navigate the complexities of the UK business rates system and make informed decisions about their properties. By considering options such as short-term leasing and property redevelopment, property owners can mitigate the financial impact of business rates on vacant property and ensure that their properties remain profitable and productive in the long term.