Business Rates Loopholes: Legal Strategies to Mitigate Costs
Unlock Savings On Commercial Properties By Reducing Business Rates Legally
Our latest blog will help you discover actionable strategies to reduce your business rate liabilities on vacant commercial properties. Examples of business rate exemptions include short-term occupancy, exploring exemptions, claiming rebates and charitable and community-based short-term leasing. There are several ways to legitimately reduce your business rate costs, with varying pros and cons. We’ll talk you through them all.
What Are Business Rates and How Are They Calculated?
Business rates are a form of taxation levied on commercial properties such as shops, offices, pubs, restaurants, warehouses, factories, and more. Like domestic council tax, the revenue generated is used to pay for a range of local services, from fire and transport services through social housing to the upkeep of communal spaces such as parks and gardens. A company’s business rate liability is based on ‘rateable’ property value. This value is based on an estimate of the potential annual rental income a commercial property might earn from the government’s Valuation Office Agency. It is worth noting that a business rates appeal process exists if you think this estimate is wrong and inflated.
Why Business Rates Loopholes Are Useful For Landlords
Should a commercial property become unoccupied, business rate liabilities pass from the tenant to the landlord. The absence of rental income is often considered an excessive burden, and various mitigation strategies have developed over the years. We, of course, have limited ourselves to these legal business rate loopholes in what follows.
Key Loopholes Property Owners Can Use to Reduce Business Rates
Navigating business rates can be challenging, especially for landlords managing vacant commercial properties. Fortunately, several mitigation strategies exist to help reduce costs. By leveraging the following examples, landlords can significantly lower their financial burdens. Each of these strategies offers a unique approach, allowing landlords to redirect resources away from managing an empty property towards finding a new tenant.
Three-Month Empty Property Relief
Businesses can apply for empty property relief to cover the first three months of any period. The 100% relief starts when the property becomes empty. After this time, however, most businesses must resume paying full business rates. It is important to note the law has recently been tightened to prevent short-term, fraudulent occupancy from being used to ‘reset the clock’ to garner multiple, repeated three-month relief periods.
Longer periods of relief may be available for some warehousing and industrial buildings, listed properties, low-rateable value properties, and properties owned by or operated for charity or community groups. If you think you’re in one of these categories, it is worth contacting your local authority about extended relief.
Small Business & Retail Rates Relief
If you’re a small business, you can claim 75% relief on any commercial property, occupied or otherwise. You need to formally apply to your local authority, which can apply SBRR depending on various criteria around size, value and other properties you might own. Providing circumstances do not change, you only need to apply once, too.
If your business is mainly a shop, hotel, restaurant, café, bar or pub, cinema, music venue, or other hospitality concern, you could also qualify for retail, hospitality, and leisure relief. This temporary measure has been extended to 2024/25.
Improvement Relief
You may be eligible for business rate relief following significant improvements to your property. Improvement relief protects building owners from the immediate impact of any rate uplift that follows an increase in a property’s rateable value. To gain improvement relief, you must have occupied the property during and after the improvement. You cannot pass on your improvement relief to anybody else.
Removing A Property From the Rating List
If your property is in a poor state of repair and cannot be economically repaired, you may be able to have its rateable value removed. The government’s Valuation Office Agency will have to evaluate the property, and any damage deemed to have been deliberately caused to reduce or remove a rateable value will be ignored if not considered fraudulent.
Charity Occupation & Community Use
Leasing a property to charitable organisations or community groups can reduce or even eliminate business rates. Under the charitable rate relief scheme, local authorities are encouraged to use a reduction in business rates to encourage property use that enhances their communities. This is especially useful for building owners facing the prospect of unoccupancy. Charity occupation & community use relief apply to short-term tenancy, meaning that donating space, even temporarily, to a good cause comes with additional financial benefits.
This specific business rate loophole is ASTOP’s core business. We specialise in achieving rate reductions for our clients by partnering them with charities and good causes in their area. This ethical practice is supported by local and national government, who balance the reduction in local taxation with a range of community benefits.
Navigating Business Rates Loopholes Responsibly
Effectively reducing business rates requires a strategic approach tailored to your property and circumstances. Here are practical solutions landlords can use to implement business rates relief legally and responsibly:
Identify Applicable Business Rate Relief Options
Start by assessing which relief schemes or exemptions your property qualifies for, such as empty property relief, small business rates relief, or charitable exemptions. It may be that multiple schemes apply, so take care to ensure you don’t miss out.
Legal Risks of Exploiting Business Rate Loopholes
Always be full, frank, and transparent when discussing your business rate liabilities. Deliberate fraud or improper use of relief schemes can have serious legal consequences for your business and you as an individual.
Engage with Local Authorities
Don’t be afraid to consult with your local council to clarify eligibility requirements before exploring rate reduction opportunities. In our experience, local authorities can be helpful, open, and proactive in supporting local businesses in filing for empty property relief or applying for small business rates relief, for example.
Partner with Business Rate Relief Experts
Consider seeking professional advice from property tax consultants, legal advisers, and other qualified experts to help you remain compliant with the law and best practices in all your business rates dealings.
Short-term Lease Business Rates Reduction
If you’re a landlord, having a tenant is the best way to remove your business rates liability. As such, we suggest that short-term flexible tenancy agreements are typically preferable to leaving a property vacant while you await a new long-term tenant.
Ethical Use of Business Rate Loopholes
Consider leveraging charitable leasing and collaborating with nonprofits and community organisations to apply for business rate relief. This approach is widely viewed as the most effective and ethically sound approach to mitigating business rate costs for unoccupied or vacant properties.
Setting Up Short-Term Leases with Charities
ASTOP specialises in supporting commercial property owners with this business rate loophole. We operate by fostering productive partnerships with landlords with empty properties and good causes to help the former gain business rate relief and the latter enjoy new retail, office or workshop spaces.
Our approach creates a unique win-win scenario that has gained approval and active support from local authorities, making it the most ethical of the various business rate loopholes discussed here. Maximising charitable partnerships and committing to long-term arrangements is a legitimate, sustainable business rate relief method.
Conclusion: Unlock the Potential of Ethical Business Rate Relief Strategies
Navigating the complexities of business rates can be challenging, but it also presents an opportunity for landlords and property owners to reduce financial burdens while contributing positively to their communities. At ASTOP, we unlock the potential of ethical business rate relief through tailored solutions that benefit both landlords and communities. Ready to Take the Next Step? Talk to ASTOP’s Director, Shayelsh Patel, who can guide you through your options.
Explore More
Check out our other blogs to learn more about local authority views on ethical business rate relief, read rate relief case studies, and more.
