Business rates are a necessary part of owning a commercial property, as they contribute to local services and infrastructure. However, paying business rates on empty properties can be a burden for property owners. In this article, we will explore the reasons behind this policy and its impact on businesses.
Business rates are a tax on non-domestic properties, such as shops, offices, and industrial units. The rates are calculated based on the rental value of the property and are used to fund local services provided by the council, such as waste collection, road maintenance, and public transport. Businesses are required to pay these rates regardless of whether the property is occupied or vacant.
The policy of charging business rates on empty properties dates back to the 2008 financial crisis when the government introduced this measure to encourage property owners to bring vacant properties back into use. The idea was to deter property owners from leaving properties empty for extended periods, as this can lead to urban decay and a decline in the local economy.
While the intentions behind this policy were well-meaning, the reality is that paying business rates on empty properties can be a significant financial burden for property owners, especially during times of economic downturn or when the property market is slow. The cost of business rates can add up quickly, making it difficult for owners to cover these expenses without generating any income from the property.
Moreover, the policy of charging business rates on empty properties can discourage property owners from investing in new developments or refurbishing existing properties. If owners are faced with the prospect of paying rates on a property that is not generating any income, they may be less inclined to make improvements or invest in their properties. This can have a negative impact on the local economy and the overall attractiveness of the area for businesses.
Another issue with paying business rates on empty properties is that it can lead to an increase in the number of properties sitting vacant for extended periods. Property owners may choose to leave properties empty rather than incur the cost of business rates, leading to a decrease in the supply of available properties and potentially driving up rental prices for businesses looking to lease commercial space.
There have been calls for reform of the business rates system to address the issue of paying rates on empty properties. Some argue that property owners should be given a grace period during which they are exempt from paying rates on newly acquired vacant properties, to allow them time to find tenants or make improvements. Others suggest that the rates should be reduced for properties that have been empty for an extended period, to provide some relief to owners facing financial difficulties.
In response to these concerns, the government has introduced some measures to alleviate the burden of paying business rates on empty properties. For example, small businesses with a rateable value of less than £12,000 are eligible for small business rate relief, which can reduce their rates bill or exempt them from paying business rates altogether. There are also schemes in place to provide relief to businesses that are experiencing financial hardship, such as the Covid-19 business rates relief scheme introduced during the pandemic.
Despite these measures, the issue of paying business rates on empty properties remains a contentious issue for property owners. The financial burden of rates can make it challenging for owners to maintain or improve their properties, leading to a decline in the quality of commercial space available. Additionally, the policy can disincentivize property owners from investing in new developments or refurbishments, which can have a detrimental impact on the local economy.
In conclusion, paying business rates on empty properties can be a significant financial burden for property owners and can have negative consequences for the local economy. While the policy was introduced with the intention of encouraging property owners to bring vacant properties back into use, it can discourage investment and development in commercial properties. Reform of the business rates system is needed to address these issues and provide relief to property owners facing financial difficulties.