When visiting a town or city, it’s hard to ignore the sight of empty shops lining the streets. The struggle of high street retailers has been well-documented, with many blaming the rise of online shopping for the decline in footfall and sales. However, another issue that is often overlooked is the burden of business rates on empty shops.
Business rates are a tax that all businesses in the UK must pay on their commercial property. The amount that each business pays is based on the rateable value of their property, which is assessed by the Valuation Office Agency. The rates are set by the government and can be a significant expense for retailers, especially for those operating in prime locations with high rateable values.
For businesses that are struggling financially, paying business rates on an empty shop can be a heavy burden. In some cases, the cost of rates can even exceed the rental income that the property would generate if it were let. This creates a Catch-22 situation for landlords and property owners, who are left with the choice of either paying the rates themselves or leaving the property empty and facing hefty penalties.
The government has acknowledged the issue of business rates on empty shops and has taken some steps to address it. In 2019, the government introduced a new relief scheme for small retailers, which exempted businesses with a rateable value of less than £51,000 from paying rates on empty properties for three months. While this was a welcome initiative for many small businesses, larger retailers and property owners are still feeling the strain of high rates on empty shops.
One of the main arguments against business rates on empty shops is that they discourage landlords from letting out their properties. If a landlord knows that they will have to pay rates on an empty shop, they may be more inclined to leave the property vacant rather than risk taking on a tenant who may not pay the rent. This can have a knock-on effect on the local economy, as empty shops not only create an eyesore but also reduce footfall in the area, impacting neighbouring businesses.
Some have called for a complete overhaul of the business rates system, suggesting that a fairer system based on turnover or profits would be more beneficial for businesses. This would mean that retailers would only pay rates based on their ability to generate income, rather than a fixed rate determined by the value of their property. However, implementing such a system would be complex and would require a significant amount of planning and consultation with businesses and stakeholders.
In the meantime, there are some steps that businesses and property owners can take to alleviate the burden of business rates on empty shops. One option is to apply for business rates relief schemes, such as the small business relief mentioned earlier, or to seek out other available exemptions or discounts. It’s also worth considering negotiating with the local council to see if a reduction in rates can be agreed upon, especially for properties that have been vacant for a long period of time.
For landlords, one solution could be to explore alternative uses for their empty properties. This could include converting shops into residential units, office spaces, or even pop-up shops or temporary installations. Not only would this help to bring in some income and offset the cost of rates, but it could also breathe new life into the area and attract more footfall.
Ultimately, the issue of business rates on empty shops is a complex one that requires a multi-faceted approach. While the government has made some attempts to address the issue, there is still much work to be done to find a long-term solution that benefits both businesses and the local economy. In the meantime, businesses and landlords must be proactive in seeking out relief and exploring alternative options to minimize the impact of rates on their empty properties.