Navigating business rates can pose a challenge, particularly for those venturing into the realm of commercial property for the first time. Below is a concise guide to essential aspects if you’re contemplating acquiring business premises, whether as a tenant or an owner.
What are business rates?
Business rates, also known as ‘non-domestic rates,’ are local taxes levied on businesses and other non-domestic properties.
Who is responsible for paying business rates on a property?
Typically, the occupier of the property is liable for business rates. Leaseholders should refer to their lease agreements, as these often specify the responsibility for business rates, especially in the case of serviced offices.
Who determines business rates?
The amount of business rate payable is determined by the central government. Local councils have limited discretion in setting these rates, except under specific circumstances.
What is the distinction between rateable value and rates payable?
Every non-domestic property is assigned a rateable value (RV) by the HM Revenue and Customs Valuation Office Agency (VOA). These values are based on the market rent of the property as of a specific date, with regular revaluations. The current rateable values, effective April 1, 2017, are derived from valuations as of April 1, 2015.
The actual amount of business rates payable is calculated by multiplying the rateable value of the property by one of two business rate multiplier figures. These multiplier figures, determined by the central government, are adjusted annually to align with inflation. Notably, a lower multiplier applies to small businesses.
What steps can I take if I believe the rateable value is incorrect?
If you suspect an error in the rateable value (RV), you have the option to request a correction from the Valuation Office Agency (VOA). This could include rectifying inaccuracies such as an incorrect floor area measurement. Additionally, if comparable properties in the vicinity have lower rateable values, you can contest the valuation. For further details, refer to GOV.UK.
Are business rates mandatory for all small businesses?
Although small businesses are required to register for business rates, the Small Business Rate Relief Scheme offers discounts of up to 100%.
Discounts under this scheme are determined by the rateable value (RV) rather than the actual rent paid and are applied on a graduated scale. Businesses may qualify for the full 100% discount.
Small Business Rate Relief for single-property occupiers provides a discount if the property’s RV is under £15,000, with the full 100% discount available for properties with an RV below £12,000.
For businesses occupying multiple properties, a discount on the primary property is available if its RV is less than £15,000, all other properties have individual RVs under £2,900, and the total RV of all properties is under £20,000.
It’s important to note that the Small Business Rate Relief scheme may undergo changes. Therefore, it’s advisable not to commit to premises solely relying on this relief.
Various other business rate reliefs are applicable under specific circumstances. Some are mandatory, requiring your council to provide the relief if you’re eligible, while others are discretionary. To explore these further, visit GOV.UK.
Must I pay business rates on a vacant building?
Your local council offers Empty Property Relief for the initial 3 months of a building’s vacancy (6 months for industrial premises). Following this period, the full rate is typically applicable. There are additional exemptions for specific circumstances, including listed buildings and properties with a rateable value (RV) under £2,900.
Where does the revenue from business rates go?
Local councils administer the collection of funds and retain a portion to finance the services they provide. Businesses do not receive any direct benefits corresponding to the rates paid; for instance, business waste collection isn’t covered by these rates.
The remaining revenue is forwarded to the central government, which then allocates the total business rate pool to councils nationwide based on each area’s population. The system is undergoing gradual changes, with the central government reducing grants to councils while allowing them to retain a larger portion of the business rates collected.
For any Business Rates-related questions or to register, reach out to our Business Rates department.