business rates on vacant property, also known as empty property rates, can be a point of contention for property owners and investors. These rates are a tax levied on commercial properties that are vacant for an extended period of time. The purpose of this tax is to encourage property owners to occupy or make productive use of their vacant properties, rather than leaving them empty. In this article, we will delve into the details of business rates on vacant property and how they can impact property owners and investors.
It is important to note that business rates on vacant property are distinct from council tax, which is levied on residential properties. Business rates are a tax on non-domestic properties, including shops, offices, warehouses, and other commercial properties. The rates are calculated based on the rateable value of the property, which is an estimate of the property’s open market rental value as of a specific date. The rateable value is set by the Valuation Office Agency (VOA) in England, the Scottish Assessors in Scotland, and the Land and Property Services in Northern Ireland.
The rateable value of a property is used to calculate the business rates payable by the property owner. The rates are set by the local government authorities and are typically paid by the property owner or the occupier of the property. In the case of vacant properties, the responsibility for paying the rates falls on the property owner.
In most cases, business rates on vacant property are charged at the same rate as occupied properties for the first three months of vacancy. After this initial period, the property owner becomes eligible for a 100% exemption from business rates for a further three months. This means that property owners are not required to pay business rates on vacant property for the first six months of vacancy.
However, after the initial six-month exemption period, property owners are required to pay full business rates on vacant property. This can be a significant financial burden for property owners, especially if the property remains vacant for an extended period of time. In some cases, property owners may be eligible for temporary relief or discounts on their business rates, depending on the circumstances of the vacancy.
The impact of business rates on vacant property can be particularly challenging for property investors and developers. Vacant properties are often subject to business rates even if they are undergoing renovation or redevelopment. This can increase the overall costs of the project and reduce the profitability of the investment. Property investors may be deterred from purchasing vacant properties due to the additional financial burden of business rates.
In some cases, property owners may consider demolishing vacant properties to avoid paying business rates on them. However, this can be a costly and time-consuming process, and may not always be feasible or practical. Property owners may also consider leasing their vacant properties at a reduced rate to attract tenants and generate income to offset the business rates.
The government has recognized the challenges posed by business rates on vacant property and has introduced measures to mitigate their impact. In England, the government announced in the 2017 budget that it would allow local authorities to increase the empty property rate from 100% to 200% for properties that have been vacant for more than two years. This measure is intended to incentivize property owners to bring vacant properties back into use or sell them to new owners who will occupy them.
In conclusion, business rates on vacant property can be a complex and contentious issue for property owners and investors. The costs of business rates on vacant property can add up quickly and impact the profitability of property investments. Property owners should be aware of the implications of business rates on vacant property and consider their options for mitigating the financial burden. By understanding the regulations surrounding business rates on vacant property and exploring potential relief measures, property owners can make informed decisions regarding their vacant properties.