About this guidance
This guidance provides ratepayers and local authorities with information about non-domestic rates (NDR) empty property rates relief. It applies to Wales only and does not replace any existing NDR legislation or any guidance on other reliefs. Billing queries about the reliefs should be directed to the relevant local authority. Enquiries about this guidance and the related legislation should be sent to the Welsh Government at the following email address: LocalTaxationPolicy@gov.wales
A range of other mandatory and discretionary NDR reliefs are also available to specific types of property or occupiers. Further information about NDR relief schemes can be found on our Business Wales webpages.
Introduction
Section 45 of the Local Government Finance Act 1988 (the 1988 Act) sets the liability of unoccupied property in a local rating list at 100% of the occupied rates. In certain circumstances this liability may be reduced.
This guidance provides information on:
- Initial period of relief for empty properties;
- Properties which do not pay empty property rates;
- Empty property relief for charities and community amateur sports clubs (CASCs); and
- Tax avoidance and empty properties.
This guidance also provides information on the treatment of partly-occupied properties.
Section 44A of the 1988 Act provides local authorities with discretion to make a reduction to a ratepayer’s liability where it appears to the local authority that part of a property is unoccupied and will remain so for a “short time only”.
Initial period of relief for empty properties
The Non-Domestic Rating (Unoccupied Property) (Wales) Regulations 2008 (the 2008 Regulations) provide for mandatory relief to be granted in the first three months, or six months if classified as industrial, that a non-domestic property is empty.
It further provides that, to qualify for this initial period of relief, the empty property must have been occupied for a period of more than 26 weeks immediately beforehand. Any period of occupation which is less than 26 weeks is disregarded. This avoids the claiming of consecutive periods of relief after short terms of occupancy.
Properties which do not pay empty property rates
The 2008 Regulations also define the types of property which do not pay empty property rates (even after the three-month rate-free period).
These include:
- Properties where occupation is prohibited by law;
- Properties kept vacant by reason of certain action taken by the Crown or a local or public authority;
- Listed buildings and those subject to preservation notices;
- Scheduled monuments;
- Properties whose owner is entitled to possession only as a personal representative of a deceased person, liquidator or trustee under a deed of arrangement;
- Property whose owner is the subject of insolvency proceedings; and
- Property whose rateable value is less than £2,600.
Empty property relief and charities and CASCs
The 1988 Act provides that a property will be in receipt of charitable relief for unoccupied properties in cases where:
- the ratepayer is a charity or trustees for a charity; and
- it appears that when next in use the hereditament will be wholly or mainly used for charitable purposes (whether of that charity or of that and other charities);
or where:
- the ratepayer is a registered club for the purposes of section 658 of the Corporation Tax Act 2010 (a CASC); and
- it appears that when the hereditament is next in use it,
- will be wholly or mainly used for the purposes of that club and that club will be such a registered club; or
- will be wholly or mainly used for the purposes of two or more clubs including that club, and each of those clubs will be such a registered club.
Partly-occupied properties
Local authorities may choose to adjust the liability for partly-occupied properties when there are practical difficulties in occupying or vacating a property. For instance, when the occupation or vacation of the property needs to be phased over a number of weeks or months, or when some event such as fire or flood has rendered part of the property unusable.
This approach is not intended to be used where part of a property is temporarily not used or its use is temporarily reduced (e.g. where plant, equipment or machinery remain in it).
Applicants should provide the date the property became or will become partially occupied, the reason for partial occupation and the date that they expect the property to be fully occupied or fully vacated.
Where a local authority proposes to provide a reduction, it should seek an apportionment of the rateable value from the valuation officer. On receipt of such a request, the valuation officer is required to apportion the rateable value of the property between the occupied and unoccupied parts of the property. This enables empty property relief to be calculated and applied in respect of the unoccupied part of the property only.
After the initial period of relief which would be applicable to the unoccupied part of the property expires (after three months, or six months for industrial properties), in most cases the apportionment will end and the occupied rate will apply to the whole property. However, if the occupier would not be liable for the empty rates on the property because it is exempt or if the property would receive another relief (e.g. owned by a charity or trustees of a charity or owned by a registered CASC), the apportionment will continue to have effect and the ratepayer will not be liable for rates on the empty part.
The operative period starts on the day on which the property became partly unoccupied. In the case of a further apportionment, the operative period starts on the day on which the further apportionment takes effect. In both cases, the period continues until one or more of the following events occur:
- the occupation of any of the unoccupied part of the property to which the apportionment relates;
- the end of the financial year in which the local authority requires the apportionment;
- the requiring of a further apportionment;
- the property becoming completely unoccupied.
The constraints above mean that, after 31 March each year, any apportionment that is operative ceases to have effect. If a local authority wishes to continue the arrangement in the following financial year, it must use its discretion to require a further apportionment. In practice, if there has not been any change to the extent that the property is partly occupied, the earlier certificate provided by the valuation officer could stand unless:
- the next financial year is a revaluation year; or
- the rateable value for the hereditament has otherwise been altered (e.g. On a material change in circumstances).
Where the part of the property which is vacant is capable of separate assessment, it will not be necessary for the local authority to exercise its discretion if the valuation officer is asked to split the existing assessment into the part that is occupied and the part that is vacant.
Tax avoidance and empty properties
The most common methods of rates avoidance appear to be associated with empty property relief. Common avoidance tactics include:
- repeated periods of artificial/contrived occupation;
- artificial or contrived occupation of properties by charities; and
- the use of insolvency exemptions.
Local authorities will already be aware of these above tactics and a number of others. It is important that they examine each application carefully and ask for further information and evidence when there is doubt as to whether any relief should be given.