When it comes to owning commercial property, one of the most important things for landlords and property owners to consider is the rates payable on empty commercial property. These rates, also known as business rates, can have a significant impact on the overall profitability of owning and maintaining a commercial property. In this article, we will delve deeper into what rates payable on empty commercial property entail, how they are calculated, and what property owners can do to mitigate their impact.
Business rates are essentially a tax that is levied by local authorities on non-domestic properties, including commercial properties. These rates are based on the rental value of the property, and they are meant to contribute towards the cost of local services such as street cleaning, maintenance of public spaces, and other community services.
In the United Kingdom, business rates are set by the government and are collected by local authorities. The rates payable on empty commercial property are a particular concern for property owners, as they can be a significant financial burden. In fact, empty commercial properties are often subject to higher rates than occupied properties, as local authorities are keen to incentivize property owners to bring their vacant properties back into use.
The rates payable on empty commercial property are calculated based on the rateable value of the property, which is determined by the Valuation Office Agency (VOA). The rateable value represents the estimated annual rent that the property could command on the open market. Once the rateable value is determined, it is multiplied by the current business rates multiplier to calculate the total amount of rates payable on the property.
For empty commercial properties, there are different rules and regulations that govern how business rates are calculated. In England, for example, most commercial properties are subject to a 100% rates charge for the first three months that they are empty. After this initial three-month period, the rates charge may be reduced to 50% of the normal rate for the remaining period that the property remains empty.
In Wales, the rules are slightly different, with commercial properties being subject to a 100% rates charge for the first six months that they are empty. Subsequently, the rates charge may be reduced to 50% of the normal rate for the rest of the time that the property remains empty.
In Scotland, meanwhile, empty commercial properties are exempt from business rates for the first three months that they are empty. After this initial three-month period, the rates charge may be reduced to 10% of the normal rate for the remaining period that the property remains empty.
It is important for property owners to keep in mind that these rules and regulations can vary depending on the region in which the property is located. Therefore, it is crucial to consult with local authorities and tax advisors to ensure that you are complying with the relevant laws and regulations governing the rates payable on empty commercial property.
There are a few strategies that property owners can employ to mitigate the impact of rates payable on empty commercial property. One option is to actively market the property for rent or sale in order to bring in a tenant as quickly as possible. By doing so, property owners can avoid having to pay the higher rates that are charged on empty properties.
Another option is to explore the possibility of seeking relief or exemptions from business rates. In some cases, property owners may be able to apply for relief if the property is undergoing renovation or repair works, or if it is deemed to be uneconomical to occupy. Property owners should check with their local authorities to see if they qualify for any relief or exemptions from business rates.
In conclusion, the rates payable on empty commercial property can be a significant financial burden for property owners. Understanding how these rates are determined, as well as the rules and regulations that govern them, is crucial for property owners to manage their finances effectively. By exploring strategies to mitigate the impact of business rates, property owners can ensure that their commercial properties remain profitable investments in the long run.