Experts have welcomed a supreme court decision which means businesses may no longer be charged a controversial tax while a property is undergoing refurbishment.
Previously, commercial properties undergoing redevelopment were liable for business rates based upon their rateable value in a usable state.
David Bailey, partner and commercial property dispute specialist at Napthens solicitors, revealed this often meant that a landlord could be in the situation where a property was unusable due to serious work taking place in an empty property, but was still classed as liable for full rates (after any period of empty rates relief had expired).
The Supreme Court ruled recently in a case involving property which was being redeveloped and incapable of occupation.
The building was being internally refurbished and had no air conditioning, electrical wiring or ceiling tiles and had a rateable value of more than £100,000.
The court decided that the property was not capable of occupation and therefore was to be given a rateable value of just £1 and classed as ‘undergoing reconstruction.’
David Bailey said the decision would be welcomed by property owners, and comes after the Chancellor announced a package of measures to help ease the burden on property owners paying business rates.
He said: “Without an occupier, liability passes back to the owner of a property. If they are getting no rental income, and the period of empty property rates relief ends, they can end up with a significant payout.
“Business rates, plus the fact they are getting no income, and often paying a commercial mortgage, can hit property owners hard.
“Before this decision, businesses were also expected to pay business rates even if a property could not be occupied due to refurbishment.
“Many felt this was a highly unrealistic scenario, and argued that the rates should not be due if a building cannot be occupied.
“It’s great that the Supreme Court has given its view in this case, which in future could ease the burden on many owners.”