Covid hits pause button on Empty Property Rate reform in Wales

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.

Cooke & Arkwright 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.”