When it comes to running a business, there are countless expenses that need to be taken into consideration. From rent and utilities to employee salaries and inventory costs, the list seems never-ending. One of the often overlooked expenses that can significantly impact a business’s bottom line is void business rates, also known as empty property rates.
What are void business rates?
Void business rates refer to the business rates that are payable on commercial properties that are empty. In the UK, business rates are a tax that businesses must pay on the properties they occupy. However, when a property becomes vacant and unoccupied, the owner is still required to pay business rates on that property. These rates are known as void business rates.
The rationale behind void business rates is to discourage property owners from leaving their properties empty for extended periods. By continuing to pay business rates on empty properties, owners are incentivized to either occupy the property themselves or find tenants to lease the space.
How void business rates are Calculated?
The calculation of void business rates is based on the rateable value of the property. The rateable value is determined by the Valuation Office Agency (VOA) and reflects the property’s open market rental value at a certain date.
Currently, properties with a rateable value of less than £2,900 are exempt from paying business rates. However, for properties with a rateable value above this threshold, void business rates will apply once the property becomes empty.
The rateable value of a property is multiplied by a uniform business rate multiplier, which is set annually by the government. The resulting amount is then subject to any applicable reliefs or exemptions before the final void business rate is calculated.
Potential Impact on Businesses
For businesses that own or lease commercial properties, void business rates can have a significant impact on their finances. In addition to regular operating expenses, having to pay void business rates on empty properties can add a considerable financial burden.
Not only do void business rates represent an additional cost, but they can also deter property owners from leaving properties empty for fear of incurring these fees. This pressure to occupy or lease out properties quickly can sometimes lead to rash decisions that may not be in the best interest of the business.
Mitigating the Impact of void business rates
While void business rates may seem like an unavoidable cost for property owners, there are several strategies that businesses can employ to mitigate their impact.
One option is to seek relief or exemption from void business rates. For example, properties that are undergoing substantial repairs or renovations may qualify for relief from void business rates. Additionally, certain types of properties, such as listed buildings or those with historical significance, may also be exempt from void business rates.
Another approach is to actively market and advertise empty properties to attract potential tenants. By quickly finding new occupants for vacant properties, owners can minimize the amount of time that void business rates need to be paid.
Finally, businesses may explore the option of leasing out empty properties on a temporary basis to generate rental income and reduce the financial strain of void business rates.
Conclusion
Void business rates are an often overlooked expense that can have a significant impact on businesses that own or lease commercial properties. Understanding how void business rates are calculated and exploring strategies to mitigate their impact are essential for businesses looking to manage their finances effectively.
By staying informed about void business rates and taking proactive steps to minimize their impact, businesses can navigate the challenges of owning and leasing commercial properties more effectively. Ultimately, being aware of void business rates and their implications is crucial for business owners looking to maintain financial stability and long-term success.