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Wednesday, May 29, 2024

Are business rates payable on empty property?

In the UK, although still far from stable, the good news is that the commercial property market is showing strong signs of improving, making the incentive of becoming a landlord/property owner a very exciting one indeed. As you can probably imagine however, nothing is ever black and white in the property world, especially in terms of business rates. Business rates are basically special taxes which have to be paid on properties which are non-residential, such as: restaurants, pubs, factories, shops, and offices. So, this basically means that if you are part of a building, or if you occupy one which you utilize for purposes other than non-domestic ones, I.E commercial use, you will almost certainly have to pay business rates. As of this writing, there are currently roughly 1.8 million properties in the UK, of commercial use, that are eligible for business rates payments in the UK. People often wonder however, ‘are business rates payable on empty property’ and if you’re one of those people, hopefully by the end of this article, everything will be made much clearer as we look at a few things to be made aware of when it comes to commercial properties and business rates. 

Are business rates payable on empty property? – In a word, yes they are, although as always, nothing is ever quite that black and white. You see, recently, the government has reformed empty property relief rates in order to create a strong incentive to basically get empty properties filled and making good money for the economy once more. You see, this is designed to create an increased incentive for properties to be rented out. However, if an industrial property has been empty for six months, the owners will no longer benefit from a relief from these rates. For the first six months they will be exempt from these rates, but anything longer will result in payments being required, so the basic occupied business rate will be necessary and must be paid in full. Back in 2011, threshold rateable values were reduced to just £2,600, down from £18,000, so this basically means that empty businesses with rateable values of more than £2,599 will be forced to pay unoccupied business rates.

Why are business rates necessary? – Business rates are necessary because they are considered the UK version of Land Value Tax, or LVT for short. Economists prefer them because they have been found to not interfere with incentives like other forms of taxation. You see, high income taxes could put potential property owners off, which in turn would harm the economy. They have been around for more than two decades, as they were first introduced back in 1990. However, as you can imagine, they are not exactly popular, other than with economists, as people complain, and rightfully so it may seem, that these rates have continued to increase, even when property prices have fallen. Landlords in particular, appear to be getting the short end of the stick when they have properties which are empty. 

Could things be improved? – This form of tax is levied upon specific forms of commercial values, as opposed to land itself, which is why it isn’t exactly the same as LVT. People have been quoted as stating that the system itself could be improved if there was actually no distinctions made between residential lands and commercial lands. There have been times where, rather than being forced to pay these rates, properties have actually been knocked down and demolished altogether. Ideally lower rates would be the obvious choice for improvement, although as mentioned, things very rarely are as black and white as they may appear to be.

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