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Budget 2020 - 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.

The most far-reaching change to business rates is the change in the Business Rates Retail Discount. This was due to be increased from a third to 50% on properties with a Rateable Value of less than £51,000, with the categories expanded to include cinemas and music venues. This budget has extended it further to 100% discount for the year from 1 April 2020. Sunak has also expanded the categories to include hospitality and leisure businesses for the following year.

Pubs with a rateable value of less than £100,000 get a discount of £5,000 whilst Public Toilets also get full relief (sic) and Local Newspapers will enjoy a discount of £1,500 on office space.

These measures usually apply to only 1 set of premises for a company.

Effect of the Budget on Empty Properties

 

This budget does 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.

 

Post Budget ways of Reducing Business Rates on Empty Properties

 

There are a number of ways to reduce the business rates liability whilst staying within the rules laid down by government. 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, 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.