When a property sits empty, it can be a significant financial burden for the owner. In addition to lost rental income, property owners must also contend with business rates on vacant property. These rates can add up quickly, making it even more challenging to keep a property empty. In this article, we will explore the impact of business rates on vacant property and discuss ways to mitigate the financial strain they can cause.
Business rates are a tax that is levied on most non-domestic properties in the UK. These rates are based on the rateable value of the property, which is determined by the Valuation Office Agency. The purpose of business rates is to help fund local services such as schools, roads, and police, and they are typically paid by the occupier of the property.
However, when a property is vacant, the responsibility for paying business rates falls to the owner. This can be a significant financial burden, especially if the property remains empty for an extended period. In some cases, the business rates on a vacant property can be as much as 50% of the property’s normal business rates bill. This can add up to thousands of pounds per year, making it difficult for property owners to afford to keep their property empty.
There are some exemptions and reliefs available for owners of vacant property. For example, properties that are undergoing major repair or structural changes may be eligible for relief from business rates. Similarly, properties that are not capable of occupation due to legal restrictions, such as listed buildings, may also be able to claim relief. However, these exemptions are not automatic, and property owners must apply to their local council to receive them.
One of the biggest challenges for property owners facing business rates on vacant property is the lack of flexibility in the system. Unlike other taxes, such as income tax or VAT, business rates must be paid regardless of whether the property is generating any income. This can be particularly frustrating for property owners who are struggling to find a tenant or buyer for their property.
In recent years, there have been calls for reform of the business rates system to make it fairer for property owners. Some have argued that business rates on vacant property should be waived entirely, or at the very least, reduced to a more manageable level. Others have suggested that business rates should be linked to the actual income generated by the property, rather than its rateable value.
In the meantime, property owners facing business rates on vacant property have few options available to them. Some may choose to rent out their property at a lower rate in order to generate some income and offset the cost of the business rates. Others may try to sell the property quickly to avoid further financial strain. However, these are not always feasible options, particularly in a struggling property market.
There are also some practical steps that property owners can take to reduce the impact of business rates on vacant property. For example, owners can ensure that their property is properly maintained and secure in order to avoid any unnecessary penalties. They can also explore different financing options, such as loans or overdrafts, to help cover the cost of the business rates until the property is rented out or sold.
In conclusion, business rates on vacant property can be a significant financial burden for property owners. The lack of flexibility in the system and the high cost of business rates can make it difficult for property owners to keep their property empty. While there are some exemptions and reliefs available, these are not always easy to obtain. In the meantime, property owners facing business rates on vacant property must explore all available options to mitigate the financial strain and keep their property afloat.