Business rates are a significant expense for property owners, particularly when a property is unoccupied. These taxes can burden financial resources, reducing profitability and creating unnecessary stress for property investors. The good news is there are several legal and effective strategies to minimize or completely avoid business rates on empty properties. In this guide, we will explore these methods in detail on how to avoid business rates on your empty property expenses while complying with regulations and ensuring you understand how to avoid business rates effectively.
What Are Business Rates on Empty Properties?
Business rates are taxes levied on non-domestic properties such as shops, offices, and warehouses. They are based on the property’s rateable value, which is assessed by the Valuation Office Agency (VOA) in England and Wales. When a property becomes vacant, the owner is still liable to pay business rates after an initial exemption period.
Understanding how to avoid business rates is crucial for property owners looking to manage their financial liabilities effectively. This guide will provide insights on how to avoid business rates legally and efficiently.
The standard exemption periods are:
- Three months for most properties.
- Six months for warehouses and industrial properties.
After the exemption period, full business rates apply, even if the property remains empty. However, there are ways to extend exemptions or reduce liabilities legally.
By applying these techniques, you will learn how to avoid business rates while ensuring compliance with existing laws.
Legal Strategies on how to Avoid Business Rates on Empty Properties
1. Claim Empty Property Relief
Most vacant properties are eligible for empty property relief during the initial exemption period:
- Retail and office spaces: Exempt for three months.
- Warehouses and industrial units: Exempt for six months.
To take advantage of this relief, you must inform your local council as soon as the property becomes vacant. Failure to notify may result in unnecessary charges or penalties.
2. Use Small Business Rate Relief (SBRR)
If your property’s rateable value is below £15,000 in England, you may qualify for Small Business Rate Relief. This relief can provide significant discounts or complete exemptions, depending on your property’s value and whether it’s occupied or empty.
3. Repurpose the Property
Changing the use of your property can sometimes exempt it from business rates. For instance:
- Converting a commercial property into residential use may make it subject to council tax instead of business rates.
- Transforming the property into a community or charitable space could qualify for additional reliefs.
Repurposing requires careful planning and consultation with local authorities, but it can be a highly effective long-term solution.
4. Lease to Charities
Letting your empty property to a charity can lead to up to 80% relief on business rates. Charities must use the property for charitable purposes, and the lease agreement should clearly outline its intended use. Ensure compliance with charity laws to avoid disputes.
5. Temporary Occupation
The “six-week rule” allows property owners to reset the empty property relief period by temporarily occupying the property. Short-term activities such as:
- Using the property for storage.
- Hosting temporary events or renting it to short-term tenants.
This resets the clock for another exemption period once the property becomes vacant again.
If you follow these strategies, you will know exactly how to avoid business rates on your empty property.
6. Appeal the Rateable Value
If your property’s rateable value is too high, you can appeal to the VOA for a reassessment. A successful appeal can reduce your liability, sometimes substantially. Ensure you provide evidence of the property’s condition or market factors that justify a lower valuation.
7. Demolish the Property
If your property is in poor condition or awaiting redevelopment, consider demolishing part or all of it. A property rendered uninhabitable or unusable may no longer be subject to business rates. However, this strategy is only suitable for properties that are genuinely unviable and should be discussed with local planning authorities.
By implementing these insights on how to avoid business rates, you can safeguard your investments.
8. Apply for Hardship Relief
If you’re experiencing financial difficulties due to empty property rates, you can apply for hardship relief through your local council. Relief is granted at the council’s discretion and usually requires evidence of financial hardship and how it impacts the community.
Additional Tips to Reduce Liabilities
Being aware of how to avoid business rates can help mitigate financial stress for property owners.
With the right knowledge on how to avoid business rates, you can enhance your financial stability.
- Conduct Regular Inspections: Keep the property in good condition to ensure eligibility for certain reliefs.
- Monitor Local Policies: Some councils offer additional support for property owners. Check your local council’s website for updates.
- Seek Professional Advice: Engage property tax advisors to explore advanced strategies and ensure compliance with local laws.
The Risks of Non-Compliance
Ultimately, understanding how to avoid business rates is essential for effective property management.
Although there are numerous legal techniques to lower business rates, aggressive tax avoidance schemes that can violate legislation must be avoided. Councils keep a close eye on business rate tactics, and noncompliance might result in fines, back payments, or legal action. Always seek professional advice to ensure your approach is lawful and sustainable.
Benefits of Managing Business Rates Effectively
Reducing or avoiding business rates on empty properties offers several advantages:
- Cost Savings: Lower expenses improve cash flow and profitability.
- Flexibility: Reliefs provide breathing room to plan the property’s future use.
- Compliance: Adhering to legal strategies prevents disputes and penalties.
Final Thoughts
Although business rates on vacant properties might be costly, you can lessen or even completely remove this burden with the correct tactics. There are many strategies to properly manage your liabilities, ranging from repurposing or temporarily occupying properties to requesting reliefs. Always make sure local regulations are followed, and for specialized solutions, get professional advice. You can safeguard your money and maximize your real estate investments by implementing these strategies.
