When it comes to commercial property ownership, one of the key financial considerations for landlords is the rates payable on empty commercial property. These rates, also known as business rates, can often be a significant expense for property owners, particularly when their property sits vacant for an extended period of time. In this article, we will delve into the details of rates payable on empty commercial property, exploring what they are, how they are calculated, and what landlords can do to minimize their financial impact.
Business rates are a tax levied by local authorities on non-domestic properties in the UK. These rates are used to fund local services and are calculated based on the rateable value of a property. The rateable value is an estimate of the open market rental value of a property on a specific date, as determined by the Valuation Office Agency (VOA). The rateable value is reassessed every five years to reflect changes in the property market.
When a commercial property is vacant, landlords are still liable to pay business rates, albeit at a reduced rate. Under current legislation, properties that are empty and not being used are entitled to a 100% discount on their business rates for the first three months. After this initial period, the full rate must be paid, unless the property falls under certain exemptions. For example, properties with a rateable value of less than £2,600 are exempt from business rates, as are properties owned by charities or in certain designated areas.
The rates payable on empty commercial property are calculated based on the rateable value of the property and the multiplier set by the government. The multiplier is the rate in the pound at which business rates are calculated and is set annually by the government. For the 2021/2022 financial year, the standard multiplier in England is 51.2p, meaning that for a property with a rateable value of £10,000, the annual business rates payable would be £5,120.
In addition to the standard multiplier, there are also different multipliers for small businesses and properties in certain areas. Small businesses with a rateable value of less than £51,000 are eligible for a lower multiplier, providing them with some relief on their business rates. Similarly, properties in enterprise zones or areas undergoing regeneration may also have a reduced multiplier to encourage investment and development.
Landlords of empty commercial properties may feel the financial strain of paying business rates on a property that is not generating any income. However, there are some steps that can be taken to minimize the impact of rates payable on empty commercial property. One option is to negotiate a rates holiday with the local council, particularly if the property has been vacant for an extended period of time. Councils have the discretion to grant a rates holiday in certain circumstances, providing landlords with some temporary relief from the financial burden of business rates.
Another option for landlords of empty commercial properties is to apply for an exemption or relief on their business rates. As mentioned earlier, properties with a rateable value of less than £2,600 are exempt from business rates, as are properties owned by charities or in designated areas. Additionally, properties undergoing major renovation or reconstruction may be eligible for a temporary exemption on their business rates until the works are completed and the property is back in use.
Ultimately, rates payable on empty commercial property can be a significant financial burden for landlords, particularly in a challenging economic environment. However, by understanding how business rates are calculated, exploring exemptions and reliefs, and engaging with the local council, landlords can take steps to mitigate the impact of rates on their bottom line. Investing in a vacant property can still be a worthwhile endeavor, but it is important for landlords to be aware of the financial implications and plan accordingly.