In the UK, the Empty Properties Tax means that if a landlord leaves a property empty for more than three months they are required to pay business tax after that period.
Photo courtesy of Healthyplanetfoundation.wordpress.com
One of the more difficult aspects for empty spaces co-ordinators or users can be persuading landlords and developers of the benefits of allowing their properties to be used on a temporary basis, particularly for artistic or creative purposes, until a commercial tenant or buyer comes along. In this way, fiscal incentives like taxing empty properties can play an important role in the avoidance of buildings remaining vacant in the longterm, as well as give life to start-up artists or entrepreneurs, local businesses or charities.
How it works
Case-scenario 1 In Bristol, an incentive for landlords is the tax exemption available when their space is temporarily used while awaiting commercial use. If they allow an eligible community or arts organisation to use the property on a temporary basis, they can pass on the business rate costs to that organisation which, in turn, can claim a business rates relief percentage.
While other local governments in the UK have scaled systems of rates relief, in Bristol eligible arts organisations can claim the full 100% rate relief. Bristol City Council generously supports arts reuse projects by itself, paying the 25% of all relieved rates required to be submitted annually to central taxation revenue.
This has facilitated the work of The Empty Shops Network, a project from Revolutionary Arts, which encourages the prototyping, testing and reinvention of the redundant spaces, in the form of pop-up shops for instance, in the UK’s town centres.
Case-scenario 2 In other cases, landlords of empty retail properties are leasing to charities as a means of reducing the amount they pay in business rates. This is due to the fact that charities are eligible to apply for relief of up to 80% if a property is used for charitable purposes.
Landlords are therefore keen to bring in charities to take over empty properties. Business rates are paid by the occupier of a property, but charities only pay 20% of what regular businesses pay. So, to entice charities to use empty premises, landlords are offering to pay rates on a charity's behalf - reducing their own rates bill by 80%.
"The work we do is only possible because of rent-free space," says Shaylesh Patel, founder of the charity Healthy Planet, which gives away unwanted books that would otherwise be sent to landfill - it does not actually sell anything. "They give us the space rent-free, and on average they give us half of what they would have paid in business rates," explains Mr Patel. "Out of that we're able to pay for our rates bill, and the on-going cost of volunteers...and that's how we can fund our activity".
Nonetheless, local authorities should be vigilant in the monitoring of such agreements in order to make sure that these buildings are being used in a meaningful way by the occupiers and avoid it only being a means for landlords to avoid paying taxes.
[Article sources: bbc.co.uk, "Businesses cut deals with charities to reduce tax bills"; and Gov.uk]