Empty shops and vacant premises have become a common sight on high streets across the UK, with the economic challenges brought about by the Covid-19 pandemic exacerbating the issue. One of the factors contributing to the rise in empty shops is the burden of business rates on landlords and business owners. The business rates system in the UK has long been criticized for its complexity and inequity, and the treatment of empty shops is no exception.
Business rates are a tax that businesses and property owners must pay on non-domestic properties, such as shops, offices, and factories. The amount of business rates payable is based on the rateable value of the property, as determined by the Valuation Office Agency (VOA), and is set by the government. Business rates are a significant cost for businesses, particularly for those operating from physical premises, as they are required to pay the tax regardless of whether they are making a profit or not.
One of the most contentious aspects of the business rates system is the treatment of empty shops. Under current legislation, businesses are eligible for a 100% exemption from business rates for the first three months that their premises are empty. After this initial period, however, they are required to pay full business rates on the property, unless it qualifies for a specific exemption or relief scheme. This can create a significant financial burden for landlords and business owners, particularly during periods of economic uncertainty when it may be more difficult to secure new tenants or buyers for vacant properties.
The impact of business rates on empty shops is twofold. Firstly, the tax can act as a deterrent to property owners looking to invest in or develop vacant premises. The prospect of having to pay full business rates on an empty property can discourage landlords from maintaining or refurbishing their buildings, as they may struggle to recoup the costs of these improvements. This, in turn, can lead to a decline in the condition of vacant properties, making them less attractive to potential tenants or buyers.
Secondly, the business rates system can exacerbate the issue of high street decline and vacancy. As more businesses are forced to close their doors due to financial constraints, the number of empty shops on the high street continues to rise. This creates a negative cycle, as the presence of vacant properties can deter footfall and investment in the area, further reducing the prospects of attracting new businesses. The business rates payable on these empty shops can further exacerbate the financial burden on landlords and property owners, creating a disincentive to bring vacant premises back into use.
In recognition of these challenges, the government has introduced a number of relief schemes and exemptions to support businesses and property owners facing financial difficulties. For example, in response to the Covid-19 pandemic, the government introduced a 100% business rates holiday for retail, hospitality, and leisure businesses for the 2020-2021 tax year. This provided much-needed relief for businesses struggling to survive during the lockdowns and restrictions imposed to curb the spread of the virus.
However, these relief schemes are often temporary and targeted, leaving many businesses and property owners facing uncertainty about their future liabilities. Calls for a comprehensive reform of the business rates system have been growing, with proposals for a more equitable and sustainable approach to taxing non-domestic properties. For example, some have suggested moving towards a system of taxing land value rather than property value, which would be more closely linked to economic activity and development potential.
In conclusion, the impact of business rates on empty shops is a complex and multifaceted issue that requires careful consideration and reform. The current system can act as a barrier to investment and development, exacerbating high street decline and vacancy rates. As the UK economy continues to recover from the effects of the Covid-19 pandemic, it is essential that policymakers address the challenges posed by business rates and work towards creating a fairer and more sustainable tax system for businesses and property owners.