When it comes to running a successful business, there are many factors that can impact its financial health. One such factor that often goes unnoticed is the business rates on empty property. This additional cost can sneak up on business owners and catch them off guard, leading to unexpected financial strain. In this article, we will explore what business rates on empty property are, how they are calculated, and what businesses can do to mitigate these costs.
Business rates are a form of tax that businesses in the UK are required to pay on the commercial property they occupy. This tax is used to fund local services and infrastructure, such as roads, schools, and waste disposal. However, what many business owners may not be aware of is that they are also required to pay business rates on any empty property they own or lease.
The rateable value of a property is used to calculate the business rates due on that property. This value is determined by the Valuation Office Agency (VOA) based on factors such as the size and location of the property. Once the rateable value is determined, it is then multiplied by the current business rates multiplier to calculate the amount of business rates due.
When a property becomes empty, businesses are still required to pay business rates on that property. The rateable value of the property remains the same, and business rates are still due at the full rate. This can be a significant financial burden for businesses, especially if they are already struggling with the costs of maintaining an empty property.
There are, however, some exemptions and reliefs available to businesses when it comes to paying business rates on empty property. Empty property relief is available to businesses that own or lease an empty property. This relief can provide businesses with a temporary exemption from paying business rates on the property. The length of the exemption period varies depending on the type of property and the local council’s policies.
Another form of relief available to businesses is the small business rates relief. This relief is aimed at small businesses with a rateable value below a certain threshold. Qualifying businesses can receive a discount on their business rates, including when the property is empty.
Business owners should also be aware of the changes made to business rates on empty property in recent years. In 2008, the government introduced changes to the way empty property rates are calculated. Previously, businesses were exempt from paying business rates on empty property for the first three months. However, this exemption was reduced to just six weeks for most properties. This change placed a greater financial burden on businesses with empty property, leading to increased costs.
In response to these changes, many businesses have sought ways to mitigate the costs of business rates on empty property. One common strategy is to undertake renovations or improvements to the property to make it more attractive to potential tenants. By making the property more marketable, businesses can reduce the amount of time it remains empty and therefore reduce the amount of business rates due.
Another strategy is to explore alternative uses for the property. For example, businesses could consider subletting the property to other businesses or converting it into a different type of property, such as residential space. By generating income from the property, businesses can offset the costs of business rates on empty property.
Ultimately, business rates on empty property can be a significant financial burden for businesses. However, by understanding how these rates are calculated and exploring the various exemptions and reliefs available, businesses can effectively manage these costs. By taking proactive steps to mitigate the impact of business rates on empty property, businesses can ensure they are in a stronger financial position and better equipped to weather unforeseen challenges.