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10-12-2014

This briefing sets out the main exemptions and reliefs from business rates for empty non-domestic properties.

What are business rates? 

  • Business rates are essentially taxes on non-domestic properties (including commercial) to help pay for local services.
  • They are payable by either:
    • an owner of a building if it is unoccupied (e.g. a freeholder); or
    • the person using the building if it is occupied (e.g. a tenant under a lease).

How are business rates calculated? 

  • The amount payable is calculated by multiplying the ‘rateable value’ of a property (set by the Valuation Office Agency) by the business rates multiplier (set by central government).
  • The rateable value is the rent that a property could be let for on the open market and it is revised approximately every 5 years.

Retail property (includes shops and offices) 

  • 100% relief for a continuous period of 3 months only.
  • Changes of ownership during the 3 month period do not trigger a fresh 3-month exemption. The exemption applies to the property, not the person paying the rates.
  • Short-term occupation of the property (6 weeks or less) by a tenant or licensee during the 3 month period will be ignored. This prevents owners from gaining additional periods of rates exemptions by establishing a temporary letting.
  • If the property is let or occupied for more than 6 weeks, the rates exemption will end at the start of that period, but when the property becomes vacant again, a new exemption period can be claimed.

Industrial and warehouse property 

  • 100% relief for a continuous period of 6 months only.
  • Short-term occupation of the property (six weeks or less) by a tenant or licensee during the 6 month period will be ignored.

Charities and community amateur sports clubs

  • Up to 80% relief for charities if the property is used wholly or mainly for charitable purposes. In certain circumstances, a discretionary ‘top-up’ relief of up to 100% may also be available.
  • Up to 80% relief for community amateur sports clubs if the property is used wholly or mainly for the purposes of that club.

Other exempt properties 

  • Listed buildings.
  • Agricultural land and buildings, including fish farms.
  • Building used for training and welfare of disabled people.
  • Buildings registered for public religious worship or church halls.
  • Empty properties with a rateable value of less than £2,600.
  • Empty properties subject to a bankruptcy order, winding up order or in administration. However, companies in administration or in liquidation are still liable for business rates where the property is being used (eg where a company continues to trade from the property).
  • Properties whose owner is prevented by law from occupying or letting (e.g. where there has been a breach of fire safety laws and a prohibition notice has been served).
  • Properties that cannot be occupied due to the action of a public authority (e.g. where the property is closed due to a prohibition order for health and safety reasons).

Small businesses 

  • Where a property is occupied by a small business and it has a rateable value below £18,000 (£25,500 in Greater London), the business may be entitled to a discount of up to 50% on its rates bills.
  • There is full relief for eligible small businesses occupying property with a rateable value of up to £6,000 and tapering relief for businesses with a rateable value of up to £12,000. This has recently been extended to 31 March 2016.

Discretionary relief

The local council has discretion to grant relief in certain situations. For example, relief is available for new commercial buildings which are completed after 1 October 2013 and before 30 September 2016 but are unoccupied for the first 18 months after completion of their construction.

Partial occupation

When a property is partly occupied, the property owner can apply to the Valuation Office Agency to have the rateable value split to reflect the occupied and unoccupied areas.

The future

In his recent Autumn Statement, the Chancellor pledged to review the current business rates system and extend short-term measures to boost the high street. Small business rates relief has been extended for another year, the annual increase in business rates is to be capped at 2% and high street shops, pubs, cafes and restaurants will benefit from a larger rebate of £1,500.

We await the outcome of the review which needs to address the current archaic system but any measures which seek to support businesses and encourage growth are to be welcomed.

This is intended for general information only and should not be considered as giving advice in relation to any individual case nor be taken as applying to any particular case. No liability is accepted for any such use of the information contained here.

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