Government Proposes Changes to Empty Property Rates for Businesses
London, UK – The property industry was in an uproar today as the government announced plans to make changes to the empty property rates for businesses. The Non-Domestic Rating Bill proposed changes to ensure more transparency, yet many are still sceptical as to its ability to carry this out. More recently, however, central government and local authorities appear to be focusing on the minority who abuse the empty property rates system, rather than ensuring support for the majority is stabilized and simplified.
The autumn statement should have provided a good platform for the government to address the issue of empty properties. However, experts across the board were disappointed when they were less than forthcoming, both on camera and in writing.
According to the Department for Levelling Up, Housing & Communities, previous consultations suggest that businesses are maintaining a minimal occupation period to obtain repeated reliefs. As such, the government is reviewing how empty property reliefs should work, if not scrapped altogether. This could have a negative impact on charitable organizations, which often hold vacant properties for use as aid distribution centers. Historically, these organizations have zero rates liability as long as the properties in question are used for charitable purposes. One drawback of such reviews is that many believe it will mean charitable organizations will lose out on empty property relief altogether.
The current economic climate is discouraging investment on a local and national level, with many business owners and leaders unable to invest in their own operations. In this high inflation, low growth economy, few are looking to take on additional properties. Many may be eligible for reliefs, such as Retail, Hospitality, and Leisure (RHL), which has been extended to offer a continued 75% discount on rates payable. As business rates are usually in the top four outgoing costs for any business, this generous relief should be allowing commercial property owners and tenants the wiggle room they need to invest. However, in reality, it is simply causing procrastination.
Anthony Hughes, Managing Director at RVA Surveyors, weighed in on the issue.
“The tricky thing here is balancing between ensuring that those in actual need of reliefs have them swiftly applied, compared to the minority who are gaming the system,” Hughes said. “Punishing the many for the actions of a few is a ridiculous stance to take when business rates have climbed so high and are set to rise even further for many when April of 2024 comes around.”
So, what about empty property relief?
Empty properties are eligible for business rates relief for a period of three months, which extends to six months for industrial units. After this period, a property cannot benefit from empty property relief unless the property in question is occupied for a period of at least six weeks, before it once again becomes vacant.
A Treasury spokesperson said in September, “There are no plans to abolish Empty Property Relief for anyone. While this relief provides important support to landlords with vacant properties, local authorities and previous respondents to consultations have identified it as a significant channel for avoidance activity. The government is therefore seeking views on proposals that aim to balance support for those who require it with the need to tackle abuse.”
One of the latest consultations on empty property business rates focuses on proposals to reduce evasion and avoidance. In Wales, they have already implemented a plan to cut down on those attempting to circumvent paying business rates. The ‘reset period’ (six weeks) required before a property can become vacant and therefore be eligible for the relief once again has been extended to a minimum of six months. This is one of the proposals considered in the Business Rates Avoidance and Evasion Consultation.
The Local Government Association (LGA) estimated that for 2017/2018, unpaid business rates cost the Treasury £250 million, which was around 1% of the projected total business rates income for that year. The most common way of doing so was found to be repeated short-term occupation of a property, resulting alone in an average loss of £396,000 for that tax year. This is only a small percentage of the expected £24.9 billion in business rates for 2023/2024. Therefore, government resources would be better prioritized streamlining the business rates system to meet modern needs.
Derick is an experienced reporter having held multiple senior roles for large publishers across Europe. Specialist subjects include small business and financial emerging markets.