Budget 2020, Coronavirus - the implications on Business Rates on Empty Properties

Chancellor Rishi Sunak's first Budget came as attention is focused on Coronavirus and a lot of his measures reflected the immediate impact to individuals and to small businesses. Since then he has made several decisions in order to help the business community and the public in general. The situation is changing daily and we are monitoring the effect for landlords with unlet commercial properties.

This page does not dwell on the effect of his decisions relating to let properties; there are a number of sites that have documented this.  Instead, we are addressing the effect of decisions on unlet properties.

Effect of the Budget and Coronavirus Measures on Empty Properties

Rishi Sunak has done nothing to help a landlord who is unable to let their premises. The landlord has the usual Void period (normally 3 months, 6 months on industrial units) where no rates are paid. However, thereafter, the landlord is left paying full rates. It appears that the policy has been to let asset holders bear some of the costs. In fact, to make matters work, as businesses go out of business, the landlord will need to pay business rates, even though there is no chance of letting properties.

Ways to Save Money

Though not related to Business Rates, it can be worth investigating Statuary Sick Pay for staff if the company who are off with Coronavirus is owned by a Company.

The cash grant for small companies, which may be applicable for SPVs set up to manage a single property.

There are a number of ways to reduce the business rates liability whilst staying within the rules laid down by government. These have not changed by the recent government decisions. I have outlined 4 approaches that have been adopted by companies:

The void period can be used repeatedly – create a lease for 6 weeks, which triggers a new void period. This saves rates during the Void period, but full rates are payable for the 6 weeks. This can be applied to all types of premises, but is most cost-effective for industrial units where the Void period is 6 months.

Partitioning of retail units so that the Rateable Value is less than £51,000 and moved into separate companies. This may require some work to ensure that the premises really are separate and not a sham and companies established for each set of premises. The council would then need to be approached for a reassessment of rates and this may be a long and costly process.

No business rates are payable if a property is unusable. If a property is due to be redeveloped, it can be a cost-saving to partially demolish it as soon as possible and therefore reduce the rates liability to zero.

The final method, and probably the most effective solution, is the Lincoln approach which can be used on all properties where business rates are payable. We create tenancies with a number of small charities and manage the relation with the local council to remove the landlord’s commercial rates liability. The result is that the landlord pays no rates for the full period that the tenancy is in operation.