Empty Property: Business Rates, Council Tax and the Empty Homes Premium

A property sitting empty between purchase and refurbishment, or between refurbishment and sale, still costs money every month it stays that way. Business rates and council tax do not pause just because nobody is using the building. Knowing exactly when the void period ends, and when the empty homes premium starts, changes how long you can afford to leave a project sitting there.

Commercial property: the void period, then full rates

An empty commercial property gets an automatic exemption from business rates for a set period after it becomes vacant. For most property types that is three months. For industrial premises — factories, warehouses, workshops — it is six months. The clock starts the day the property stops being occupied, not the day you bought it, so a property that has already been empty for two months when you complete only has one month of exemption left.

Once the void period runs out, full business rates become payable at the same level as if the property were occupied, unless a specific relief applies. There is no automatic reduction just because the building is empty and unused.

Where empty rates relief still exists

A handful of reliefs survive the end of the void period:

• Small properties. Properties with a rateable value below £2,900 are exempt from empty property rates entirely, for as long as they remain unoccupied.
• Listed buildings. A listed building, or one subject to a preservation order, is exempt from empty rates for the whole period it stays empty — not just the initial void.
• Charities and community amateur sports clubs. Exempt where the next use of the property will be mainly charitable.
• Legally prohibited occupation. Where an owner is prevented by law from occupying the property, such as under a demolition or closing order, no empty rates are due.

Outside those categories, a developer holding a vacant commercial unit through a refurbishment or a slow letting campaign is generally paying full rates from month four (or month seven for industrial stock) onward. Build that into the project appraisal rather than discovering it partway through.

Artificial occupation schemes do not work

For years, some owners used short-term "box shifting" arrangements — letting an unconnected company occupy a building for a few weeks purely to reset the void period — to keep claiming fresh exemptions indefinitely. Legislation now requires a minimum period of genuine occupation before a new void period can start, and the courts have gone further. The Supreme Court ruled in 2021 against a scheme using shell companies for brief, artificial occupation, effectively confirming that occupation with no real business purpose does not reset anything. Genuine, active use of the space does. A gesture at occupation designed only to avoid rates does not.

Residential property: council tax follows a different test

A dwelling being renovated is not automatically exempt from council tax just because nobody is living in it. The starting position is that council tax remains due on any dwelling that exists on the valuation list, occupied or not.

Where a property is genuinely uninhabitable — not fit to live in, rather than simply unmodernised — you can apply to the Valuation Office Agency to have it removed from the council tax list altogether while the work is carried out. No banding, no charge. The bar is high and mirrors the same kind of test used for SDLT purposes on derelict property: missing a kitchen or bathroom, structural work exposing the building to the weather, or work that makes the property unsafe to enter, rather than a property that is merely dated or needs decorating. See our guide to SDLT refunds on uninhabitable property for how the same "genuinely unfit" line is drawn on the tax side of the same project. The VOA typically wants evidence — photographs, a structural survey, a schedule of works — before agreeing to delete the entry, and it is worth applying as soon as the works start rather than after the event.

Once the property is reasonably capable of occupation again, it goes back on the list and council tax resumes, usually at the point practical completion is reached rather than when the last coat of paint goes on.

The empty homes premium

For a property that is simply standing empty and substantially unfurnished, rather than genuinely uninhabitable, most councils in England now charge a premium on top of standard council tax once it has been empty for a qualifying period — currently one year for most authorities, down from two. The premium can escalate the longer the property stays empty, with some councils applying higher bands for properties left vacant for several years or more.

Many councils have also extended a version of the premium to furnished second homes — properties that are not anyone's main residence, even if they are lived in occasionally — from as little as one year of non-main-residence use. This has caught out a number of investors and developers holding a finished but unsold or unlet property, or a property being kept for occasional use, who assumed the premium only applied to derelict or abandoned buildings. It does not. Each council sets its own scheme within the statutory maximum, so the figure and the timing vary by local authority, and it is worth checking the specific policy for wherever the property sits before assuming a council-wide standard applies.

For a project running behind schedule, the premium is a real cost worth modelling from the outset, not a surprise to deal with once the letter arrives.

Why this matters for project appraisal

Business rates and the empty homes premium both punish time, not effort. A refurbishment that overruns by six months does not just cost extra build cost and extra finance interest — it can also tip a property from a rates-exempt void period into full liability, or from ordinary council tax into premium territory. Factoring realistic timelines, and the point at which each charge starts, into the numbers before you commit to a project avoids an unpleasant recalculation midway through.

Common questions

How long is a commercial property exempt from empty business rates?

Most empty commercial properties get a three-month exemption from business rates from the date they become vacant. Industrial premises such as factories and warehouses get six months. After that, full rates are usually payable unless a specific relief applies, such as the small property exemption or listed building status.

Do I pay council tax on a property that is uninhabitable during renovation?

If a dwelling is genuinely unfit for occupation, not merely dated or in need of decoration, you can apply to have it removed from the council tax list entirely while the work is carried out. The threshold is high and the Valuation Office Agency expects evidence, such as photographs and a surveyor's report showing structural work is needed before the property can be lived in.

What is the empty homes premium and how much is it?

Councils in England can charge a premium on top of standard council tax once a home has been empty and substantially unfurnished for a set period, currently one year for most authorities. The premium can rise in stages the longer the property stays empty, and many councils now also apply a premium to furnished second homes from one year of non-main-residence use. Rates are set locally within statutory caps, so the figure varies by council.

Can property developers avoid empty property rates with short-term occupation?

Artificial short-term occupation schemes designed purely to reset the void period have been targeted by legislation and by the courts, including a 2021 Supreme Court ruling against a scheme using shell companies for brief occupation. Genuine occupation resets the clock; occupation with no real business purpose is unlikely to survive challenge.

This article is general information, not personal tax advice, and tax and business rates rules change. Your own position depends on facts we cannot see from here — please take advice before acting on anything above.

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