Empty shops have become a common sight on high streets across the country, with the rise of online shopping and changing consumer habits hitting brick-and-mortar retailers hard. As a result, many businesses are struggling to survive, leading to a surplus of vacant properties. However, what many people may not realize is that even empty shops are subject to business rates, which can further burden struggling businesses. In this article, we will explore the impact of business rates on empty shops and how businesses can navigate these challenges.
Business rates are taxes levied by local authorities on the non-domestic properties, including shops, offices, and factories. The rates are calculated based on the rateable value of the property, which is determined by the Valuation Office Agency. The rates are a significant source of revenue for local authorities, funding services such as education, public transport, and waste collection.
For businesses operating in physical premises, business rates are a necessary expense that they must budget for. However, when a property becomes vacant, businesses are still liable to pay business rates on the empty shop. This can pose a significant financial burden, especially for small businesses that are already struggling in a challenging economic environment.
One of the main issues with business rates on empty shops is that they discourage property owners from investing in and revitalizing vacant properties. The rates act as a disincentive for property owners to refurbish or redevelop vacant properties, as they would still be liable for business rates even if the property is not generating any income. This can contribute to the decline of high streets and town centers, as empty shops deter customers and reduce footfall in the area.
Moreover, the current business rates system has been criticized for being outdated and unfair. The rates are based on the rateable value of the property, which is determined by the rental value of the property as of April 2015. This means that businesses are paying rates based on outdated property values, which may not reflect the current economic climate or the condition of the property. In essence, businesses may be paying more in rates than what the property is actually worth, further burdening struggling businesses.
To address these challenges, the government introduced a temporary relief scheme for empty properties in 2008, known as the Empty Property Relief. Under this scheme, businesses can receive a discount on their business rates for empty properties for a specified period. However, this relief is only temporary and does not provide a long-term solution to the issue of business rates on empty shops.
In recent years, there have been calls for reforming the business rates system to make it fairer and more flexible for businesses. One proposed solution is to introduce a turnover-based system, where businesses would pay rates based on their sales rather than the rental value of the property. This would make the rates more reflective of the business’s ability to pay and would provide relief for struggling businesses, including those with empty shops.
Another suggestion is to introduce a vacant property credit, where businesses would receive a discount on their rates for vacant properties that are being actively marketed for rent or sale. This would incentivize property owners to invest in and revitalize empty properties, while also providing relief for businesses that are temporarily vacant due to circumstances beyond their control.
Overall, the impact of business rates on empty shops is a significant challenge for businesses, particularly in the current economic climate. The burden of paying rates on empty properties can deter investment in revitalizing vacant properties and further burden struggling businesses. However, with calls for reform and proposed solutions on the table, there is hope for a more equitable and flexible business rates system that supports businesses in navigating these challenges.