How to Avoid Business Rates on Empty Properties

How to Avoid Business Rates on Empty Properties

Paying hefty business rates for commercial properties that are not generating income is definitely a huge financial burden. This is why landlords are looking for ways to avoid business rates on empty properties. In 2008, the government reduced the rates relief period for a non-industrial property to 3 months and 6 months for an industrial property.

This was in a bid to motivate landlords to get their premises reoccupied fast and supply the rising demand without having to increase the development of commercial properties. This was also aimed at improving the standards of competition in the market.

Normally, tenants of commercial properties are the ones obligated to pay business rates. However, with this law, landlords of non-industrial property are expected to start paying full business rates 3 months after the tenant has vacated while industrial properties receive 6 months of relief.

This is a major point of concern for landlords since if they are unable to reoccupy their premises within this period, then it means that they will not only be getting no revenue but they will also be incurring huge expenses.

vacant empty property

Business Rates Exempt Properties

There are certain properties, whether occupied or not, are completely exempt from business rates. This means that if your property is amongst these types, then you don’t have to worry about paying any business rates.

  • Land that is used for agricultural purposes and the structures within. This also includes fish farms.
  • Church halls and buildings that are registered for religious purposes
  • Buildings that are meant for the welfare of the disabled people

It is, however, important to note that these exemptions only apply to properties in England. Exemptions in Wales and Scotland apply differently.

Empty Business Rates Exempted Properties

Sometime back business rates on empty properties did not apply to properties that had a rateable value of under £18,000. However, currently, exemptions from business rates apply to empty properties that have a rateable value of under £2,900. Exemption from business rates applies until they are reoccupied.

  • Empty listed buildings receive exemption until they are reoccupied.
  • Empty buildings that are owned by registered charities only receive exemption if it is established that once they are occupied again they will be used for charity purposes.
  • Empty community amateur sports club buildings only receive exemption if in the future they will be used for sports. These properties are referred to as zero-rated properties.

Other Conditions That Exempt Empty Properties From Business Rates

  • If the property owner has been declared bankrupt
  • If the property is owned by a company that is in administration. However, if the company is still trading in the property, then it will have to pay the business rates.
  • If the owner has been granted possession of the property in the capacity of a trustee under a contract.
  • If the property is unfinished or in an economically irreparable state.
empty offices

What Does This Mean For Property Owners?

If your property doesn’t fit any of the above-listed criteria, then after 3 months of being vacated (if it is non-industrial) or after 6 months (if it is industrial), then you will be forced to pay 100% of the business rates for the property. With the current economic conditions, finding tenants within the stipulated period of time is a major challenge.

However, even if the law seems strict on the landlords, there are numerous loopholes that the landowners are using, to their advantage, in order to avoid paying business rates on empty properties. Putting up these measures significantly helps to ease the financial burden that they would have otherwise endured. If you are receiving empty property rates bills or are worried about a property that is about to become vacant, then here are some methods you too can use.

Short Term Tenants

One of the most common techniques of avoiding to pay business rates on empty properties is finding tenants that are willing to occupy the property for at least 6 weeks. Once it is let or occupied, the tenant will be obliged to pay the business rates, however, after their lease is over and the property is left empty once again, your rates exemption period is renewed. The process can be repeated several times. In most cases, a reverse payable premium is usually considered which helps to reduce the liability of the tenant.

However, for this method to work, it must be proven that the property occupation is beneficial to the tenant and that there is some degree of permanence. Another main challenge of this method is finding temporary tenants, however, there are guardian services firms that are dedicated to providing guaranteed temporary property accommodation for a fee. If this is something you would like to know more about, you can contact us here at VPS to find out more about our property guardian and vacant property services.

The Property Owner Occupies

In some cases, the landlord themselves might act as temporary tenants. In this method, the landlord occupies the land for at least 6 weeks. Upon vacation, the landlord can claim a renewed rates exemption period. This technique can also be utilized repeatedly. However, same as the short-term tenant, the landlord has to prove that the property occupation is beneficial to them.

Letting To Charity

Letting out your property to charity is another effective measure that you can implement. It is worth noting that registered charities are only obliged to pay 20% of the full business rates. Therefore, provided they use the property for charity purposes only, then you might make an arrangement to pay for them the 20% may be through contributions. This is definitely a good deal instead of you having to pay the full 100% on your own.

Demolishing The Property

For a property to be business rates payable, then the occupation of the property must be beneficial to the occupier. In the worst-case scenarios, a property owner might choose to demolish the property in order for it to be less beneficial. However, this option should be chosen after a lot of considerations. A cost-benefit analysis should be properly done to avoid any regrets.

There are many techniques for avoiding paying business rates on empty properties. However, some are more effective than others. The ones listed above are some of the best ways. However, only time will tell if the government will find ways to counter these measures.


VPS Guardians

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