12 January 2009
From April 2008 the Government made changes to the business rates charged on empty properties by reducing the relief available. The initial purpose of the legislation was to "increase incentives for property that is empty to be let or for the property in fact to be redeveloped and thereby to reduce rents and prices for new and existing businesses". Rents have been reduced but that has been due to the economic downturn and not the empty rates changes.
So what, if anything, can be done by a property owner left having to pay tax on unused assets during a period of recession?
There are several ways to ease the pain, Sue Deacon, Commercial property senior associate details them below:
Intermittent Occupation
This involves the occupation of the building for at least six weeks to trigger a new rates free "void" period. This is particularly beneficial for warehouse and industrial properties for which the new void period is six months but also works for other properties. The occupation can be at a low or peppercorn rent, it can be by the owner, and the process can be repeated.
If you are an individual owner of a property all you need do is use the vacant building for storage for at least six weeks, notify the Council in writing of the date you have moved in and again in writing as you move out and then another period of void rates can be claimed. Similarly it is possible for a company to grant a lease to one of their subsidiaries or even to an individual director.
If the lease was to a third party it would be necessary to have the occupation properly documented, especially if the third party was paying a low or peppercorn rent, to avoid the third party staying in occupation beyond the six week period at a discounted rent.
Charitable Occupiers
Charitable occupiers benefit from an 80% rate relief, so there is a strong incentive to let the premises to a charity. However, to benefit from the relief the property has to be occupied for the purposes of the charity. If it is held by a charity but is vacant, it will be zero rated for the purposes of empty rates if it can be shown that when it is next occupied it is likely to be for charitable purposes.
Prohibition of Occupation
Identifying a legal prohibition for occupation exempts a vacant property from empty rate liability. This has to be a positive prohibition, not merely the absence of a consent or approval. If occupation would give rise to a prohibition order, for example under Health and Safety at Work or any other legislation, the property should be exempt from empty rate liability.
Damaging or Stripping a Property (removal from rating list)
The stripping out of a property to the point of disrepair so that it is excluded from being assessed has been the most contentious issue arising from the new legislation. This is because rating law contains an assumption that the property to be valued is in a "reasonable state of repair" even if it is not. Many landlords that expected dilapidated buildings to be deleted from the rating list have found that, as a result of this assumption, the Valuation Office Agency will not agree to exempt the building.
The Chancellor, following much lobbying, did make changes to the effect that for the year 2008 - 2009, properties with a rateable value below £2,200 are not liable for empty rates. For the following rate year (2009 - 2010) the minimum figure will be increased to £15,000.
For more details on the Empty Property legislation, please contact the Commercial property practice group on 01753 279086 or email comproperty@bpcollins.co.uk. |
