Vacant business rates, often referred to simply as “vacant rates” or “empty rates,” are a financial burden that many business owners face when their commercial properties sit empty. These rates are charged by local authorities in the UK on properties that have been unoccupied for a certain period of time. While these rates are meant to encourage property owners to keep their buildings in use and prevent urban decay, they can often be a significant expense for businesses that are struggling or in the process of relocating.
The system of vacant business rates can be complex and confusing, so it’s important for business owners to understand how these rates are calculated and what they can do to mitigate their impact. In this article, we’ll take a closer look at vacant business rates and explore some strategies for managing and reducing these costs.
How are vacant business rates Calculated?
Vacant business rates are calculated based on the rateable value of a property, which is determined by the Valuation Office Agency (VOA). The rateable value is essentially an estimate of how much rent a property could fetch on the open market at a certain date. For properties that have been empty for more than three months, the rateable value is effectively doubled, resulting in significantly higher rates.
For example, if a property has a rateable value of £10,000 when it is occupied, the owner could be looking at paying around £5,000 per year in empty rates once the property has been vacant for three months. This can be a substantial financial burden for businesses that are already struggling, especially if the property remains empty for an extended period of time.
Exemptions and Relief
Fortunately, there are some exemptions and relief options available to businesses facing vacant rates. For example, properties that are being refurbished or undergoing structural repairs may be eligible for a three-month exemption from empty rates. Additionally, charities and community amateur sports clubs can apply for 80% relief on their vacant rates if they meet certain criteria.
There are also provisions in place for small businesses with a rateable value of less than £2,900. These businesses are exempt from paying empty rates on their properties, which can provide some much-needed financial relief for smaller enterprises.
Mitigating the Impact
While vacant business rates can be a significant burden for property owners, there are some strategies that businesses can use to reduce or mitigate these costs. One option is to negotiate a temporary lease or license agreement with another party to occupy the property, even if only for a short period of time. This can help to reset the clock on the three-month exemption period and reduce the amount of empty rates that need to be paid.
Another option is to consider renting out the property on a short-term basis for events or temporary pop-up shops. This can generate some income for the property owner while also keeping the property occupied and potentially attracting a longer-term tenant.
In some cases, it may be possible to apply for a reduction in the rateable value of a property if certain circumstances apply, such as a change in market conditions or the property becoming difficult to let. Property owners can also seek professional advice on how to challenge the rateable value and potentially reduce their empty rates liability.
Ultimately, the key to managing vacant business rates is to stay proactive and engaged with the process. By understanding how these rates are calculated, exploring available exemptions and relief options, and considering creative strategies for reducing costs, businesses can better navigate the challenges of empty rates on their commercial properties.
In conclusion, vacant business rates can be a significant financial burden for property owners, but there are ways to mitigate their impact. By understanding how these rates are calculated, exploring exemptions and relief options, and considering creative strategies for reducing costs, businesses can effectively manage their liability for empty rates. With careful planning and proactive management, businesses can navigate the challenges of vacant rates and minimize their financial impact.