How to avoid business rates on empty property

Under the 2007 Rating (Empty Properties) Act, most commercial property owners are subject to empty property business rates after just three months of their building becoming vacant. These are payable on any occupiable non-domestic properties, such as shops, offices, and industrial buildings. With commercial property vacancies at a four year high—one in 10 UK shops are now empty—local authorities collect over £1bn a year in empty property business rates. 

However, if you are the owner of a vacant commercial property, you may be eligible for relief, or even exempt from business rates altogether. There are numerous ways to either avoid paying empty property business rates or reduce your liability beyond simply appealing the rateable value of our building.

Properties that are completely exempt from business rates

You are exempt from paying business rates in England if you own any of these property types, regardless of whether or not it is empty:

  • Fish farms, agricultural buildings, and structures where the main purpose is agricultural in nature.
  • Property used for training or the welfare of disabled people.
  • Property registered for religious purposes.

Non-exempt properties which have become empty

While most commercial buildings enjoy a three-month relief period on business rates, some vacant properties can enjoy extended relief. 

  • Industrial premises receive an extra three months exemption.
  • Listed buildings are completely exempt from business rates until reoccupied.
  • Properties with a rateable value under £2,900 are completely exempt from business rates until reoccupied.
  • Buildings owned by registered charities are entirely exempt from business rates, providing future use will remain charitable.
  • Community amateur sports club buildings are entirely exempt from business rates, providing the property will continue to be used for that purpose.

Other scenarios where you may be exempt from business rates or eligible for relief

If your commercial property isn’t listed above, you may still be exempt from paying business rates on vacant property or eligible for relief:

If property guardians are in place

One of the most effective ways of securing business rate relief is by using property guardians. This is where people temporarily live in a vacant property in order to keep it under observation, and in good condition. Because the property becomes temporarily residential, its owners instead pay council tax, which is significantly cheaper, saving landlords around 90% on business rates. Furthermore, as this arrangement is temporary, it does not constitute a change of use, and is recommended by the regulator and councils as legitimate means of mitigating business rates on vacant property. 

A security guard guarding a building

Here at Oaksure, we have helped numerous clients to reduce their tax expenditure through live-in guards, and you too could benefit from our service. Relief on business rates is upheld from the moment the property guardians move in, until you require the building back for its primary use. The security and maintenance advantages of property guardianship make this arrangement even more worthwhile.

Property guardians provide 24-hour protection at a fraction of the cost of static security guards, and can deter squatters from occupying your building, prevent it from deteriorating, and stop your property becoming a fly-tipping target. We are also the only company in the UK who ensures that their guardians have Security Industry Authority (SIA) training and qualifications, guaranteeing their professionalism and proficiency. To find out more about our property guardianship service, please don’t hesitate to get in touch with our team

If your property is incapable of beneficial occupancy 

If your building is damaged by a flood, fire, or explosion, it is no longer considered fit for purpose in the eyes of tax collectors. The technical term for this is “beneficial occupancy” or “beneficial occupation”, and properties which do not meet this criteria can be removed from the rating list entirely. The effects need to be severe, however, and your property must require reconstruction rather than merely being in a state of disrepair. As such, simple refurbishment would not be deemed serious enough for your property to attract business rate exemption, although you may be able to obtain temporary relief. Your property would be removed from the rating list once reconstruction work begins.

Your building can also become exempt from business rates if it is being demolished, or is due for redevelopment. It is important to note that the Valuation Office Agency (VOA) will check to see that you’re not using redevelopment as a device for avoiding rates, so it must be a genuine case. The VOA will likely ask for proof that planning permission exists for redevelopment or demolition.

Some ratepayers will also carry out “constructive vandalism”—such as purposely removing partitioning or suspending lighting—in an attempt to bolster their case for the property being incapable of beneficial occupation, and that it would be uneconomic to repair the damage. If you decide to do this yourself, you must balance the potential savings in business rates against the cost of damage, especially if you ever wanted to let or occupy the property in the future. 

If there is no demand for your property, and it commands no annual rent

In this scenario, your property could either be removed from the rating list or enjoy a reduced rate. However, this depends on whether the lack of demand is down to external factors like oversupply or high vacancy in the locality, thus weakening your property’s rental value. Your own actions as a landlord can also have some effect, such as not undertaking active and comprehensive marketing of your property. Likewise, carrying out restrictive marketing, like short term lets, will indicate you have not acted reasonably. As such, you would not be removed from the rating list. A change in the use or occupation of other properties in the area must also be demonstrable in order for an appeal to succeed.

If work is done on your property after is completed

It is common for work to be carried out on a property after it is substantially complete. For instance, shops are typically only completed to a shell state, so that tenants can finish it to their specifications. You may still be served a completion notice by the Billing Authority if you find yourself in this situation—which applies to both new properties and those that have undergone substantial structural alterations. As they must allow a reasonable period for such work to be completed, you may be able to avoid paying business rates for a little while longer.

If you disagree with the completion date and appeal

If you’re served a completion notice and don’t appeal against it, the VOA will value the property as if it was complete. However, if you disagree with the completion date, you can either negotiate a new one with the Billing Authority or appeal to the Valuation Tribunal and argue that it is unreasonable to expect that the property will be completed by this time. A successful appeal would, therefore, enable you to delay paying business rates. You must lodge this appeal within four weeks of receiving the notice. 

If your property is partly-occupied 

Local councils can grant relief in this scenario under Section 44a of the Local Government Finance Act 1988 in line with the occupied and unoccupied areas. This would only apply where the situation is temporary—for instance, where there are practical difficulties in occupying a property in one area because accommodation is not yet fully ready for occupation. 

If your property is re-occupied for a minimum of six weeks 

Short-term occupation (of less than six weeks)—of a tenant or licensee, for instance—will be ignored, meaning business rates will continue to run during that period. This prevents owners from enjoying further periods of exemption for immaterial lettings. Letting your property out for longer than six weeks means that your rates exemption is lifted but, significantly, enables you to claim a further three month period of exemption when it becomes empty again. 

If you lease the building to a charity 

Commercial buildings occupied by a charity qualify for 80% business rate relief, and this can even be increased by up to 100% by the relevant Billing Authority. This also applies if you lease it to an educational or religious establishment. 

If none of these exemptions applies, you have three months to find an occupant, or you face paying business rates on a property that fails to generate any income, resulting in a loss of money. It is important to note that changes in ownership will also not trigger a new period of exemption, as the exemption is on the property itself.

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