When it comes to owning commercial property, there are many costs that come into play beyond just the initial purchase price. One of these costs is the rates payable on empty commercial property. These rates, also known as business rates, can sometimes catch property owners off guard if they are not familiar with how they are calculated and what they are used for.
So, what exactly are rates payable on empty commercial property? And how are they calculated? In this article, we will break down everything you need to know about these rates and how they can affect your bottom line.
Firstly, it is important to understand what business rates are. Business rates are a tax on non-domestic properties, including commercial properties such as shops, offices, warehouses, and factories. These rates are charged by local authorities in England, Scotland, and Wales and are used to help fund local services such as education, infrastructure, and emergency services.
When a commercial property is vacant, the property owner is still required to pay business rates, albeit at a reduced rate. This can come as a surprise to some property owners who may assume that they are exempt from paying rates on a property that is not generating any income.
The rates payable on empty commercial property are calculated based on the rateable value of the property. The rateable value is determined by the Valuation Office Agency (VOA) in England, the Scottish Assessors in Scotland, and the Valuation Office in Wales. It is essentially an estimate of the yearly rental value of the property if it were rented out on the open market.
The rateable value is then used to calculate the business rates payable on the property. In England, for example, the standard multiplier for business rates is set by the government and is applied to the rateable value to determine the annual amount owed. There are also other factors that can affect the final amount payable, such as any reliefs or exemptions that the property may be eligible for.
It is worth noting that there are some exemptions and reliefs available for empty commercial properties. In England, for example, properties with a rateable value of less than £2,900 are exempt from paying business rates when they are empty. Similarly, properties that are undergoing major renovation or are in certain types of areas may also be eligible for a temporary exemption from rates.
Despite these exemptions, many property owners still find themselves having to pay rates on empty commercial properties. This can be a significant financial burden, especially for small businesses or property owners who are struggling to find tenants for their properties.
So, why do property owners have to pay rates on empty commercial properties? The idea behind charging rates on empty properties is to discourage property owners from leaving their properties vacant for extended periods of time. By making it financially burdensome to keep properties empty, local authorities hope to incentivize property owners to either rent out their properties or sell them to someone who will make productive use of them.
While this may seem like a reasonable approach, it can sometimes backfire, particularly in times of economic downturn or when there is a surplus of commercial properties on the market. In these situations, property owners may find themselves stuck with empty properties that are costing them more in rates than they are worth.
Overall, it is important for property owners to be aware of the rates payable on empty commercial properties and to plan accordingly. Whether they are considering purchasing a commercial property or already own one that is sitting vacant, understanding how rates are calculated and what exemptions may be available can help them make informed decisions about their properties.
In conclusion, rates payable on empty commercial properties are an important consideration for property owners. These rates, although intended to incentivize property owners to make productive use of their properties, can sometimes be a burden for those who are struggling to find tenants or sell their properties. By understanding how rates are calculated and what exemptions may be available, property owners can better navigate the complexities of owning commercial properties and make informed decisions about their investments.