15/09/2010
Many businesses are paying empty rates unnecessarily. There are many reasons why premises might be empty and an equal number of strategies that can be adopted to mitigate the rate liability. Premises might be vacant between tenancies, due to business relocation, or because the premises are awaiting or undergoing refurbishment or redevelopment.
Since 1 April 2008 owners and lessees of empty commercial and industrial premises have been liable to full business rates after an initial exemption period of six months for industrial property, and three months for other commercial premises.
The rate bill is calculated by multiplying the rateable value of the premises by the uniform business rate, (tax rate) and bills may be subject to transitional adjustments following a Revaluation. Revaluations occur every five years and the last was in April 2010.
Any mitigation strategy should consider both the valuation and charging elements of the rate bill.
Valuation
Whether the premises are occupied or vacant, the starting point is the rateable value and ratepayers have a right of appeal. The initial valuation is set by the Valuation Officer, who also deals with appeals.
Special considerations apply to empty premises which are at the end of their useful life and require substantial refurbishment or alteration to bring them back into use. Premises might also be rendered temporarily un-lettable during works of alteration or refurbishment.
Valuation Officers will argue that the legislation requires the premises to be valued as though they are in good repair, disregarding the actual condition of the premises or works that are underway but this is an over-simplification.
Every valuation must take account of the nature of the premises, the market for them, and the nature and extent of any works underway. In appropriate cases the rateable value can be reduced to nil so that there is no rate liability.
Charging Regulations
There are special exemptions and reliefs from rates that might assist in mitigation bills. Those of most general application are detailed below.
- Re-occupation for six weeks will trigger entitlement to a new exemption period and it may be possible to arrange temporary lettings to maximise the advantage of this provision.
- Charities enjoy 80% relief from rate and may be willing to take the premises on flexible terms and share the benefits of their relief with the landlord.
- All temporary occupations should enable the landlord to regain possession at short notice if a longer letting can be arranged.
These are only intended to be examples of some opportunities for reducing empty rates. The law governing business rates is highly complex and business ratepayers should seek the advice of a suitably qualified surveyor, specialising in this field, who can advise more fully.
