Business Rates Explained

All non-domestic properties such as shops, offices, pubs, warehouses, factories and holiday rental homes, guest houses and even stables (unless you use the horses for farming) have to pay Business Rates to their local councils. Business Rates are based on open market rental value (‘rateable value’) and the correct ‘multiplier’ (an amount set by central government).

An empty commercial property is a liability for a landlord as landlords are liable to pay full business rates after 3 months and on empty industrial units and warehouses pay full business rates after 6 months. This, of course, has created some anxieties for the Landlord and although there are some Business Rates Relief available for certain properties such as building with a rateable value under £2,900 (until they are reoccupied), by and large, most commercial properties are liable for Business Rates. However, if there has been occupation of at least 6 weeks during the empty period, then the time period to attract business rates starts again.

As the charities are exempt from Business Rates (provided the property’s use will be mostly for charitable purposes), some Landlord have been eager to grant short term licences to charitable organization to avoid paying Business Rates. Hence, the reason one sometimes comes across temporary charity shops in very expensive commercial areas. Some of such temporary licences is designed to avoid business rates, until the Landlord find the right tenant. In a decided case it was held that occupation by a charity for storage purposes in two adjoining warehouses could avoid business rates liability even though only 25% and 30% of the floor area was actually occupied. However, the Charity Commission subsequently warned charities that they should not be involved in avoiding business rates.

Under certain circumstances, a commercial enterprise can claim hardship relief from the Council by showing that they are in financial difficulties without such a relief, or alternatively, that a relief from the Council  is in the interests of local people as for example the local people rely mostly on their business for services and goods provided. If an application for Hardship Relief is successful, the Council will reduce the business rate bill.

By Alireza Nurbakhsh dated 3rd June 2019