Business rates are a form of tax that commercial property owners have to pay to local authorities. The rates are based on the rateable value of the property and are used to fund local services. However, one of the most controversial aspects of business rates is the treatment of empty properties.
Empty properties are subject to business rates, just like occupied properties. This means that owners of empty properties still have to pay rates even though they are not generating any income from the property. This can be a significant financial burden for property owners, especially in times of economic downturn when it may be difficult to find tenants.
The rationale behind charging business rates on empty properties is to discourage property owners from leaving properties vacant for extended periods. The government wants to incentivize property owners to bring their properties back into use and contribute to the local economy. By imposing rates on empty properties, the government hopes to encourage property owners to either rent out their properties or sell them to someone who will put them to productive use.
However, many property owners argue that charging rates on empty properties is unfair and counterproductive. They argue that they are already losing income from the property by not having it rented out, and charging rates on top of that only adds to their financial strain. Some property owners are forced to keep properties vacant due to factors beyond their control, such as a downturn in the market or difficulties finding tenants. In these cases, charging rates on empty properties seems particularly harsh.
Moreover, charging rates on empty properties can have unintended consequences. For example, some property owners may be discouraged from investing in properties in certain areas if they know that they will have to pay rates on empty properties. This could lead to a decrease in property development and investment in those areas, which could have a negative impact on the local economy.
There have been calls for reform of the business rates system in relation to empty properties. Some have suggested that rates on empty properties should be reduced or waived altogether to incentivize property owners to bring their properties back into use. Others have proposed more flexible rates for empty properties, such as rates that gradually increase the longer a property remains empty.
In recent years, some changes have been made to the business rates system in relation to empty properties. In 2017, the government introduced a policy that exempted properties with a rateable value of less than £2,900 from paying business rates when they are empty. This was aimed at helping small businesses and reducing the financial burden on property owners of smaller properties.
In addition, in response to the COVID-19 pandemic, the government announced a 100% business rates holiday for all retail, hospitality, and leisure properties for the 2020-2021 tax year. This meant that these properties did not have to pay any business rates, even if they were empty. The government also introduced a 66% relief for all other businesses, including those with empty properties.
These changes have provided some relief for property owners with empty properties, particularly during challenging economic times. However, many argue that more needs to be done to address the issue of business rates on empty properties. There is still a lack of consistency in how empty properties are taxed, with some regions charging full rates while others offer exemptions or discounts.
In conclusion, business rates on empty properties continue to be a contentious issue for property owners. While the government’s intention is to incentivize property owners to bring their properties back into use, many argue that the current system is unfair and counterproductive. There have been some changes to the system in recent years, but more needs to be done to ensure that rates on empty properties are fair and consistent across the board.