Biggart Baillie Solicitors

Rating The Rates - Empty Rates Relief in England and Scotland

Monday, February 09, 2009

by Robin Corbett

In England, before April 2008, owners of industrial property obtained 100% relief from business rates while buildings were unoccupied, while owners of empty shops or offices obtained 100% relief for the first three months and 50% relief thereafter.

Since that date, empty retail and office premises pay full rates after the initial first three months, and industrial and warehouse premises are eligible for six months' relief.

However, following an outcry from those involved in the commercial property sector and in acknowledgement of the current economic climate, the Chancellor in his pre-budget report announced that empty properties in England with a rateable value of less than £15,000 (i.e. properties worth less than £250,000) would be exempt from paying empty property rates from 1 April 2009, for one year only. 
 
Here in Scotland, the position is more liberal.  100% mandatory rates relief is available to all properties which are empty for the first 3 months and 50% relief thereafter. Further, for some properties such as industrial and listed buildings and properties with rateable values of less than £1,700 there are no rates to pay even after the first 3 months.

In April 2008, empty rates relief was also extended in Scotland and England to apply to any company which is in administration, extending to administration the relief previously available in bankruptcy or liquidation. This applies to all types of buildings which are empty, for the period during which the company is in administration.

This change was in response to the high court decision in England in a case involving Exeter City Council, in which the council had successfully argued that the rates for both occupied and unoccupied properties were payable as a ‘necessary expense’ of the administration, and as such ranked ahead of the administrators fees and floating charge holders.

Since the changes to administration procedure in 2002 the test of expenses that enjoy a statutory priority has been subject to a similar mandatory rule as the expenses of liquidations. Whilst the governments in Scotland and England have acted quickly to remove the anomaly this created in relation to unoccupied property (such that no rates were payable if the company was in liquidation, there was no automatic relief for companies in administration, and any rates payable had a priority) it would appear that a policy decision has been taken to allow the priority to remain for the rates in respect of occupied properties incurred during the period when the company in administration is trading.

This appears to run contrary to the government’s idea of promoting rescue whereby a decision to continue trading will give the government a priority and reduce the amount available for secured creditors and expenses, whilst taking an early decision to vacate a property will achieve relief from rates.

If you require further information on the issues raised by this article, please contact Robin Corbett, Head of Property at rcorbett@biggartbaillie.co.uk or on 0141 228 8096.