Business Clinic: Rates and EPCs on building conversions

Whether it’s a legal, tax, financial or management issue, Farmers Weekly’s Business Clinic experts can help.

Here, chartered surveyor Sam Shaikh from Carter Jonas’ Taunton office explains the business rates and energy performance considerations when converting farm buildings to an alternative commercial let use.

Q: We farm in Somerset and have recently left dairying after 40 years because we want to slow down and diversify.

We have some farm buildings that we could convert into commercial units to provide a passive income, but I don’t know where we stand on business rates and Energy Performance Certificate (EPC) regulations.

What do we need to know?

A: This is a fairly common enquiry, particularly from dairy farmers stepping back from full-time production.

When considering such a change in use, business rates and EPCs need to be factored into the decision-making process.

See also: Business Clinic: Film location offer – is there potential?

Once a building is used for a commercial purpose, it may become liable for business rates.

Agricultural buildings used solely for agriculture are generally exempt, but that exemption is very specific and can fall away very quickly if the use changes to storage, workshops or small industrial units made available to let to third parties.

What often surprises landowners is that there currently is no automatic requirement for you to notify the Valuation Office Agency (VOA) or the local council that a building is now being used commercially.

It is up to the authorities to identify any potential liability and assess each property.

New obligation from April 2026

However, from April 2026, a new legal obligation, known as duty to notify, will begin its phased rollout in England, becoming fully mandatory by 1 April 2029.

This is a new requirement for ratepayers to provide timely and accurate information about their properties to the VOA.

Importantly, if your properties do become assessed for business rates, the liability can usually be backdated to the date the unit was first occupied for the new use.

That means you could be facing an unexpected bill covering many months, potentially years (as far back as 2023), rather than just from the date you receive the letter.

For 10 basic units, that could quickly add up to tens of thousands of pounds. Reliefs or exemptions may apply, but these often must be claimed separately and are not always applied automatically.

Therefore, if a request for information is made, or a notice to enter the properties into the rating list is received, it is important that the landowner ensures they properly understand their obligations and liabilities and that the rates have been correctly assessed.

Timing is important

From 1 April 2026, a new business rates revaluation comes into force. New rateable values will apply, based on rental evidence from April 2024.

Industrial and workshop-style units are generally seeing increases, so anyone with existing or planned commercial lets should understand what that could mean for future liabilities and budget accordingly.

How you go about your conversion is your choice – just be aware of the potential outcome and seek professional advice at an early stage. Chartered surveyors are obliged to comply with a code of practice.

Energy Performance Certificates  

For most commercial lets, it is a legal requirement for the landlord to have an EPC in place before letting or selling a building.

However, very basic farm buildings may qualify for exemptions. Uninsulated, low-spec units with a low energy demand can fall outside the requirements.

An exemption still needs to be properly assessed and registered, and that normally requires assessment from a specialist commercial energy assessor.

The risk otherwise is that you are found to be non-compliant after tenants are already in place.

Since 1 April 2023, there has been a requirement for non-domestic landlords to obtain at least an EPC “E” rating, unless they have registered a valid exemption.

For non-exempt properties with an EPC rating of F or G, you must take appropriate steps to comply with the requirements of the Minimum Energy Efficiency Standards Regulations.

If a building is found to need EPC improvements, the cost of upgrading insulation, lighting or heating can fundamentally change the viability of the whole project.

In contrast, if an exemption is confirmed, you gain peace of mind that the income is secure.

Converting farm buildings is a great option, but the income is not passive by default.

Take advice, understand where agricultural exemptions end, check business rates have been assessed correctly then challenge if required and be clear on who pays what.

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