Business rates are taxes paid by business owners to local councils in the UK. They are based on the rateable value of the property where the business is located. However, when a commercial property is empty or not being used, the business owner may still be liable to pay business rates. These rates are known as void business rates.
Void business rates can be a significant financial burden on business owners, especially if they are struggling to find tenants or customers. In this article, we will explore what void business rates are, how they are calculated, and what business owners can do to mitigate their impact.
What are void business rates?
Void business rates are business rates that are payable on empty commercial properties. In the UK, business rates are a tax on non-domestic properties that are used for business purposes. They are calculated based on the rateable value of the property, which is determined by the Valuation Office Agency (VOA).
When a commercial property becomes empty or unoccupied, the business owner may still be required to pay business rates on that property. This is because the property is still considered to be in use for business purposes, even if it is not generating any income.
Void business rates are intended to encourage property owners to actively market and occupy their premises, rather than leaving them empty and unused. The rates are meant to incentivize property owners to keep their properties in use, which in turn helps to stimulate economic activity and prevent the decline of town centers and commercial districts.
How are void business rates Calculated?
The calculation of void business rates is slightly different from that of occupied properties. When a property becomes empty, the business owner is entitled to a period of relief known as empty property rate relief. This relief period typically lasts for three months for most commercial properties, but can be extended to six months for certain industrial properties.
After the empty property rate relief period expires, the business owner will be required to pay the full amount of business rates on the property. However, the rateable value of the property may be reduced by 50% for the first three months that it remains empty. This is known as the empty property rate reduction.
After the initial three months, the property owner will be required to pay the full amount of business rates on the property, unless they are able to secure a tenant or occupant. In some cases, vacant properties may qualify for other forms of relief or exemption, such as small business rate relief or charity rate relief.
Mitigating the Impact of void business rates
For business owners who are struggling to pay void business rates on empty properties, there are several strategies that can help to mitigate the financial impact:
1. Negotiate with the Local Council: In some cases, business owners may be able to negotiate with the local council to reduce or defer their void business rates. Councils may be willing to offer payment plans or other forms of relief to help businesses that are facing financial difficulties.
2. Explore Business Rate Relief Schemes: There are several business rate relief schemes available to help businesses reduce their tax liability. These schemes include small business rate relief, rural rate relief, and charity rate relief. Business owners should research these schemes to see if they qualify for any form of relief.
3. Consider Renting Out the Property: One of the best ways to avoid paying void business rates is to find a tenant or occupant for the property. By renting out the property, business owners can generate income and avoid having to pay business rates on an empty property.
4. Seek Professional Advice: Business owners who are unsure about how to deal with void business rates should seek professional advice from a tax advisor or property consultant. These professionals can provide expert guidance on how to minimize the impact of void business rates and navigate the complexities of the UK tax system.
In conclusion, void business rates are an important consideration for business owners with empty commercial properties. By understanding how these rates are calculated and exploring strategies to mitigate their impact, business owners can better manage their tax liabilities and protect their financial interests. By actively seeking relief, negotiating with local councils, and considering alternative uses for empty properties, business owners can minimize the burden of void business rates and potentially boost their bottom line.