If you own a vacant property, you may be aware of the various costs associated with maintaining it while it sits unused. One of the expenses that often catches property owners off guard is vacant property business rates. These rates can add up quickly and significantly impact your property investment, so it’s essential to understand how they work and what you can do to mitigate the costs.
What are vacant property business rates?
Vacant property business rates, also known as empty property rates, are a tax that commercial property owners must pay when their property sits unoccupied for an extended period. In the United Kingdom, these rates are charged at the same rate as occupied properties for the first three months of vacancy. However, after the initial three months, the rates can skyrocket to 100% of the property’s rateable value.
The purpose of vacant property business rates is to discourage property owners from leaving their buildings empty for extended periods. By imposing these rates, the government aims to encourage property owners to either occupy or redevelop their properties, ultimately contributing to the local economy and community.
How are vacant property business rates Calculated?
Vacant property business rates are calculated based on the rateable value of the property. The rateable value is an estimate of the property’s open market rental value as of a specific date. This value is set by the Valuation Office Agency (VOA) and is used to determine the property’s annual business rates.
For the first three months of vacancy, vacant property business rates are charged at the same rate as if the property were occupied. However, after the initial three-month grace period, the rates can increase significantly – up to 100% of the property’s rateable value. This steep increase is meant to incentivize property owners to take action to either occupy or redevelop their vacant properties.
Ways to Mitigate vacant property business rates
If you own a vacant property and are concerned about the rising costs of vacant property business rates, there are several strategies you can implement to mitigate the financial burden:
1. Short-Term Occupancy: One option to reduce vacant property business rates is to find a short-term tenant to occupy the property temporarily. By doing so, you can reset the clock on the three-month grace period, allowing you more time to find a more permanent solution for the property.
2. Regeneration Projects: Another way to address vacant property business rates is to invest in redevelopment or regeneration projects for the property. By improving the property and making it more attractive to potential tenants, you can increase the chances of occupying the property and generating rental income.
3. Empty Property Relief: In some cases, you may be eligible for empty property relief, which provides a discount on vacant property business rates. To qualify for this relief, you must meet certain criteria set by the local council, such as proving that the property is undergoing repairs or is part of a larger redevelopment project.
4. Appeal the Rateable Value: If you believe that the rateable value of your property is inaccurate, you have the right to appeal to the Valuation Office Agency. By providing evidence such as recent rental data or property valuations, you may be able to lower the rateable value and consequently reduce your vacant property business rates.
Conclusion
Vacant property business rates can be a significant financial burden for property owners, especially if the property remains unoccupied for an extended period. Understanding how these rates are calculated and exploring strategies to mitigate the costs can help you navigate the challenges of owning a vacant property.
Whether you choose to find a short-term tenant, invest in regeneration projects, apply for empty property relief, or appeal the rateable value, taking proactive steps to address vacant property business rates can ultimately protect your property investment and contribute to the vitality of your local community.