Currently, business rates are charged on nearly all non-domestic properties such as shops, offices and factories while they are in use. Properties with a rateable value of less than £2,600 are exempt from rates when they become vacant.

However, buildings with a rateable value above £2,600 only qualify for a three-month exemption period if they are unoccupied. After that, empty property rates become payable. Some industrial premises qualify for a six-month exemption period.

The charges can be a drain on company finances and it’s no wonder that they’re
sometimes referred to as a Bombsite Britain tax. Thankfully, there is some relief in the form of the 42-day rule. This means that if a business property is occupied for six weeks and full rates are paid, then it will qualify again for an exemption perio

This is helpful but it raises the question as to what level of occupation is needed to trigger further grace periods. Should it be all of the premises, or would half or even a quarter be enough?

A recent High Court ruling suggests the level of occupation can be very low indeed. The Makro cash and carry chain used a 140,000 sq ft warehouse to store just 16 pallets of documents for six weeks. It then applied for an exemption period and has now won its case in the High Court.

The judge held that even though the usage amounted to only 0.2% of the total warehouse capacity, it was enough to qualify for an exemption from rates.

It’s clearly good news for landlords and companies who can’t offload surplus space.

It will allow them more scope when managing tax liabilities and give them more
confidence to use the 42-day rule.

Please contact us if you would like more information about the issues raised in this article or
any aspect of commercial property law.

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