When it comes to operating a business, there are numerous expenses that can quickly add up and impact the bottom line. One such expense that many business owners may not be fully aware of is business rates on unoccupied premises. These rates can eat into profits and create additional financial burdens for businesses, making it important for business owners to understand how they work and what can be done to reduce the impact.
Business rates are taxes that are levied on most non-domestic properties in the UK, including shops, offices, and warehouses. These rates are calculated based on the rateable value of a property, which is determined by the government’s Valuation Office Agency. The rateable value is used to calculate how much a business owner will need to pay in business rates each year.
When a property is unoccupied, however, business rates can still apply. This is often a surprise to business owners who may assume that they will not have to pay rates on a property that is not generating any income. Unfortunately, this is not the case, and unoccupied premises are still subject to business rates, albeit at a reduced rate.
The current legislation states that unoccupied commercial properties will be subject to business rates at a rate of 100% for the first three months that a property is empty. After this initial three-month period, the rates will increase to 200% of the normal rate. This can create a significant financial burden for businesses that may be struggling during a period of vacancy.
There are a few exemptions to this rule, such as if a property is listed as being exempt from empty property rates due to certain legal or physical restrictions. Additionally, properties that are deemed to have a rateable value of less than £2,600 are also exempt from empty property rates. However, these exemptions are few and far between, leaving many business owners with the burden of paying business rates on unoccupied premises.
So, what can business owners do to reduce the impact of business rates on unoccupied premises? There are a few strategies that can be employed to help alleviate some of the financial burden associated with empty property rates.
One option is to appeal the rateable value of the property with the Valuation Office Agency. By providing evidence that the rateable value of the property is too high, business owners may be able to reduce the amount they are required to pay in business rates. This can be a time-consuming process, but it can be well worth the effort if it results in a lower rateable value and reduced rates.
Another option is to consider short-term leasing or renting the property during periods of vacancy. By generating some income from the property, business owners may be able to offset some of the costs associated with business rates. This can also help to keep the property in use and potentially attract a long-term tenant.
Finally, business owners may want to consider investing in the property to make it more attractive to potential tenants. By making improvements to the property, such as upgrading the facilities or enhancing the curb appeal, business owners may be able to attract tenants more quickly and reduce the amount of time that the property is unoccupied.
In conclusion, business rates on unoccupied premises can create a significant financial burden for business owners. Understanding how these rates work and what can be done to reduce their impact is crucial for businesses that may be struggling during periods of vacancy. By appealing the rateable value, considering short-term leasing options, or investing in the property, business owners can mitigate some of the costs associated with unoccupied premises and potentially attract tenants more quickly.