Rates rip off

Topical Issues
Empty property rates
Business rate supplements

Quick guide to the empty property rates legislation


Rating of unoccupied properties - changes effective from 1 April 2008

  • 100% liability for commercial properties that have been empty for 3 months or more, 6 months in the case of industrial and warehouse hereditaments.
  • Zero rate for empty properties owned by charities and community amateur sports clubs.
  • Listed buildings continue to be exempt.
  • Introduction of a permanent exemption for properties owned by companies in administration.
  • Power to reduce empty property rate from new 100% level back to minimum 50%.
  • Primary legislation introduced to allow for the introduction of regulations  to tackle rate avoidance tactics by disregarding changes to the state of property.
  • Action to tackle other potential rate avoidance tactics such as failure to complete a property, intermittent occupation and bogus tenancies have been deferred (see below)
  • Applies to England and Wales (power to vary amount down to 50% minimum).
  • No changes for Scotland and Northern Ireland yet although Scotland are considering going the same way as England and Wales.

Rating of unoccupied properties - rationale for change

  • Barker Review of Land Use Planning:
    • Recommended government should make better use of fiscal interventions to encourage an efficient use of urban land;
    • In context of other government tax initiatives (fiscal strategy);
    • Business premises renovation allowance; and
    • Land remediation relief.
  • Lyons Inquiry into local government recommended reform of empty property relief and other reliefs & exemptions.
  • Enhance the supply of commercial property by reducing rents and improving access for new and existing firms.
  • Enhance the supply of brownfield sites for redevelopment. Additional revenue to Treasury of £950 million in 2008-09 and £900 million in 2009-2010.

Rating of unoccupied properties - legislation

  • Rating (Empty Properties) Act 2007.
  • From 1 April 2008 empty commercial property became liable for the full business rates charge after an initial rate free period three months, or six months for factories and warehouses.
  • Section 45(1) of the Local Government Finance Act 1988 provides that owners of empty non-commercial properties are liable to pay non-domestic rates if certain conditions apply. One of those conditions is that the property must fall within a class prescribed within regulations made, in relation to England, by the Secretary of State.
  • Non-Domestic Rating (Unoccupied Property) (England) Regulations 2008  SI 386:
    • Regulation 3 – The class of non-domestic hereditaments prescribed for the purposes of section 45(1)(d) of the Act consists of all relevant non-domestic hereditaments other than those prescribed in regulation 4.
    • Regulation 4 (a) - (m) – Hereditaments not prescribed for the purposes of section 45(1)(d) of the Act:
      • (a) which, subject to regulation 5, has been occupied for a continuous period not exceeding 3 months
      • (b) which is a qualifying industrial hereditament that, subject to regulation 5, has been unoccupied for a continuous period not exceeding 6 months
    • Regulation 5 – Continuous occupation:
    • A hereditament which has been unoccupied  and becomes occupied on any day shall be treated as have been continuously unoccupied for the purposes of regulation 4(a) and (b) if it becomes unoccupied again on the expiration of a period of less than six weeks beginning with that day.

Rating of unoccupied properties - anti-avoidance

  • Rating (Empty Properties) Act 2007 inserts new section, 66A, into Local Government Finance Act 1988.
  • The government has now decided to make regulations under section 66A at a later date if there is evidence that avoidance activity is taking place.
  • Power to make regulations in England and Wales:
    • “to deal with steps that owners might take (or omit to take) in an attempt to avoid unoccupied property rates through causing or allowing the state of their property to change. Such regulations may provide that the state of any property forming part of an unoccupied hereditament shall be deemed not to have changed since before any prescribed event or as the result of an act or omission by or on behalf of a prescribed person.”
  • Regulations may make provision for:
    • circumstances in which, and the length of time for which, the change of state of the property may be disregarded;
    • the prescribing of assumptions to be used in determining whether, or to what extent, the state of a property has changed compared to an earlier point in time; and
    • the circumstances in which an act is to be treated as having been carried out on behalf of a prescribed person.

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