Owners of vacant non-domestic premises that are undergoing refurbishment should take note of a recent Court of Appeal judgment. The court held that a property that had been undergoing internal refurbishment was not exempt from business rates. On the valuation date, various major building elements had been removed. These included the air conditioning system, electrical wiring, sanitary fittings and most of the ceiling tiles.

Those carrying out substantial refurbishment work should not automatically assume that their properties will be assessed at a nominal rateable value. Whether the work required to put property into repair can be fairly described as “repairs” will depend upon the particular facts. Following this decision, property owners may find it more difficult to argue that their properties should be exempt from business rates.

This business briefing sets out the exemptions from business rates for non-domestic properties.

Retail property

  • 100% relief for a continuous period of three months only
  • Changes of ownership during the three-month period do not trigger a fresh three-month exemption. The exemption applies to the property, not the person paying the ates
  • Short-term occupation of the property (of six weeks or less) by, for example, a tenant or licensee during the three-month period will be ignored. The three-month period and the business rates exemption will continue to run during that period of short-term occupation. This rule prevents owners from gaining additional periods of rates exemptions by establishing a temporary letting
  • If the property is let or occupied for a period of more than six weeks, the rates exemption will end at the start of that period, but when the property becomes vacant again, a new exemption period can be claimed

Industrial and warehouse property

  • 100% relief for a continuous period of six months only
  • Short-term occupation of the property (of six weeks or less) by, for example, a tenant or licensee during the six-month period will be ignored

Other exempt properties

  • Properties whose owner is prohibited by law from occupying it or allowing it to be occupied (for example, where there has been a breach of fire safety and a prohibition notice has been served)
  • Properties that cannot be occupied due to the action of a public authority (for example, where the property is closed due to a prohibition order for health and safety reasons)
  • Listed properties (including property that forms part only of a listed property)
  • Empty properties:
    • with a rateable value below a certain threshold (£2,600 from 1 April 2011)
    • whose owner is entitled to possession in their capacity as trustee under a deed of arrangement
    • owned by individuals subject to a bankruptcy order
    • owned by a company subject to a winding up order, and
    • owned by a company in administration. However, an administrator is liable to pay business rates where property is being used (for example, where a company in administration continues to trade from the property)

Small business rate relief

  • Where a property is occupied by a small business and it has a rateable value below £18,000 (£25,500 in Greater London), the business may be entitled to a discount of up to 50% on its rates bills
  • Until 31 March 2015, there is full relief for eligible small businesses occupying property with a rateable value of up to £6,000 and tapering relief for businesses with a rateable value of up to £12,000

Zero rating: Certain property is “zero rated” where the property is empty and the property owner is:

  • A charity and it appears that, when the property is re-occupied, it will be wholly or mainly used for charitable purposes (whether of that charity or that of other charities)
  • A community amateur sports club (CASC), where it appears that when the property is re-occupied, it will be wholly or mainly used for the purposes of that CASC (or for the purposes of that and another CASC)

Empty properties held by charities or CASCs pending disposal for other purposes will not benefit from zero rating.

Discretionary relief: The local council has discretion to grant relief in certain situations.

Partial occupation: When a property is partly occupied, the property owner may apply via the local council to the Valuation Office Agency to have the rateable value split to reflect the occupied and unoccupied areas.

The content of this Business Briefing is for information only and does not constitute legal advice. It states the law as at March 2015. We recommend that specific professional advice is obtained on any particular matter. We do not accept responsibility for any loss arising as a result of the use of the information contained in this briefing.