Covid hits pause button on Empty Property Rate reform in Wales

14 January 2021
  • Business Rate advice Cooke & Arkwright

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The Welsh Government has published a summary following its consultation on the draft Non-Domestic Rating (Unoccupied Property) (Wales) (Amendment) Regulations 2021. The consultation involved proposed changes to regulations designed to reduce the abuse of Empty Property Rate Relief, which the WG said is the most reported method of non-domestic rate avoidance.

Currently, owners of empty properties do not pay rates for three months after the property becomes empty to allow them time to find a new occupier. Industrial properties have a relief period of six months. If a property is temporarily occupied for 42 days or more, during which time full rates are paid, the relief period is reset to allow another three or six months relief.

The WG considers that this originally well-intended 42 day rule is being used as a common method of rate avoidance where ‘periods of artificial or contrived occupation are staged’. It proposes lengthening the period to six months occupation before an owner can claim a further period of empty property rate relief to deter misuse of the reset mechanism.

The amended regulations will commence on 1st April 2022, rather than 2021, to allow adequate preparation time for billing authorities and ratepayers. This is because of the views expressed in the consultation about the ongoing economic circumstances and potential emerging changes to the property markets resulting from Covid-19.

The consultation summary of responses includes concerns expressed about:

  • the negative impact on short term lets
  • the impact on new businesses and the length of time it takes to let a property
  • the current period of relief at three or six months is too short
  • the potential risk of demolition of empty properties to avoid liability
  • the timing of the proposed changes in the current economic climate
  • the possible negative impacts on the Welsh economy and complications caused from differing regulations between England and Wales
  • the fairness of empty property rates as an effective tax if people were refusing to pay.

Business Rates Director Andrew West, a member of the RICS Rating and Local Taxation Policy Panel comments: 

“This is a welcome and not unsurprising announcement. The impact of Covid has altered the fundamental dynamics of the property market with demand for many classes of occupation at unprecedented lows. The imposition of empty property rate reform this year would add to the financial and economic stress currently being experienced by the Welsh economy.

“This will also keep Wales on a par with the shorter occupational requirement in England for one more year.”

Click here for the full Consultation Summary

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I have worked with Jeremy Symons over the past three years successfully leasing and buying property in support of my business. I continue to be very pleased with his knowledge of the market and expertise. Our relationship over this time has resulted in acquiring 20,000 sq ft at Capital Business Park in Cardiff, leasing 11,000 sq ft at Southpoint, and subsequently leasing an initial 42,000 sq ft at Parc Bedwas, followed by a succession of expansions of a further 11,000 and then 47,000 sq ft, enabling us to centralise all of our operations at Parc Bedwas in a single 100,000 sq ft facility. The acquisitions were completed at the perfect time for tenant purposes and the rent fixed throughout the term at very economical rates. A job well done.

Bob James, Aerfin