2024 Expected Empty Business Rate Changes in England
The team at ASTOP was delighted to host a ‘Reviving Our Communities’ panel event at the start of the year. It was an opportunity to bring those with an interest in commercial property to gain insight into Empty Rates relief.
At ASTOP, we try and link the two complementary groups together to bring an end to wasted space. Our role is to act like a property agency working with landlords that have got spaces that are either going to be rented or converted and convince them it is cheaper and better for the community to give it to us rent-free temporarily. We can then work our magic in the charity sector to put that retail, office or warehouse space to good use.
Hosting the event in January was the perfect event to talk through our predictions for possible changes to our business over the year to come.
Ineffective Strategies For Managing Empty Property Business Rates
Our presenter, ASTOP founder Shaylesh Patel, outlined various strategies for managing unoccupied property business rates now and in the future. This follows a period of industry consultation, led by the Department for Levelling Up, Housing and Communities, which focused on tactical steps to avoid avoidance and evasion rather than a complete systems overhaul.In summarising the results, Shalif initially focused on mitigations that are likely to become less effective over time, in England at least, due to changes in legislation and local authority priorities.
Avoiding business rates with artificial insolvency arrangements is already proving ineffective as a loophole and remains best avoided. Shalylef, however, goes on to discuss guardianship, resetting ‘the clock’ with six weeks of occupancy and temporary reclassification to agricultural space in some detail. For example, the response to turning a commercial space into a ‘snail farm’ is likely to differ from locality to locality. Some English Councils will not fight it, as it is too difficult, others will scrutinise it more than they have done previously. English councils have taken disputed agricultural use cases to court and won.
While not universally applicable, using guardian programs to occupy buildings temporarily can be beneficial for preventing squatting and damage due to disuse, though it’s not suitable for all types of properties. The idea, however, of breaking a large retail space into individual units with bathroom facilities, is not practicable for many looking to reduce business rates.
The tactic of briefly occupying a property for six-weeks to ‘reset’ the period of unoccupied rates relief clock is already inapplicable to Wales & Scotland. The loophole is likely to be closed in England at some point in the near future too.
You might also consider stripping out the property to reduce its rateable value (RV), getting your property Listed or otherwise negotiating with the Valuation Office to achieve an RV below the business rates threshold. All these, Shaylef explains, are probably overly challenging for most properties.
Effective Strategies For Managing Empty Property Business Rates
Shaylef advocates two strategies for managing business rates on empty properties. Both follow the principle that the best way to avoid paying rates on an empty property is to make sure your property isn’t empty.
The first is to ‘cut a deal’ with a retail or commercial tenant. This might involve reduced rent, a rent-free period or other support. This could lead to 100% small business relief or 75% retail, hospitality or leisure relief in England.
The second option, and ASTOP’s speciality, is involving the charity sector. After fundraising, charities’ biggest challenge is finding appropriate space. Helping a charity in this area could lead to an 80% reduction in rates without a Rateable Value cap.
Predictions For Changes in Empty Property Business Rate Reduction
Shaylef shared some predictions for the future of empty property business relief. He suggested the six-week ‘reset’ period would be extended to six months making it a lot less effective as a mitigation tool. He also suggested industrial property owners who currently get 6 months of relief might see this halved to 3 months.
Shaylef also highlighted a natural trend towards local councils having more power in this area. He also suggested a twelve-month time limit may be applied to insolvency cases so, after closing down, you are less likely to see chain stores left empty for multiple years.
Other predictions centre on clearer guidance from the Valuation Office, tighter checks on the application of Small Business Rates Relief and time limits on how long new builds can be left empty. Shaylef’s final prediction is a growth in the importance of ethical business rates relief and an increased willingness amongst local English councils to participate in such schemes.
The Benefits of Ethical Empty Property Business Rate Reduction
Currently, Shaylef explains that working with a charity saves roughly the same as undertaking a process of paying rates every 43 days and resetting the rates clock with repeated six weeks of occupation. This doesn’t, however, include tax relief at the end of a twelve-month period. If you let a charity use your space, you can claim the value of the rental period to reduce your taxable profits even though no money changed hands.
In the future, if England follows Scotland and Wales, it is likely the six-week occupancy period will be extended to six months. This means significantly less tax relief is available using temporary occupancy as your mitigation method. Working with a charity, however, remains the same and becomes a much more viable option for landlords.
Shaylef works through specific examples, with illustrative graphs, in the video of his presentation here. It is worth watching if you are currently navigating the complexities of business rates management. It highlights the diminishing effectiveness of traditional avoidance tactics and advocates more sustainable, socially responsible and acceptable strategies.
