Business rates explained
Business rates explained
Business Rates can be a tricky topic to get to grips with, especially if you’re new to the world of commercial property. Here’s our quick guide to what you need to know if you’re considering taking on business premises, whether as a tenant or an owner.
What are business rates?
Business rates are local taxes on business and other non-domestic property. You might also see them described as ‘Non-Domestic Rates’.
Who is liable to pay the business rates on a property?
Normally, the person or organisation liable for Business Rates is the occupier. If you’re a leaseholder, your lease will specify (leases for serviced offices, for example, often include Business Rates).
Who sets Business Rates?
The amount you pay is set by central government. Local councils have very little discretion, except in a few very specific circumstances.
What is the difference between Rateable Value and rates payable?
Almost every non-domestic property has a Rateable Value (RV) set by the HM Revenue and Customs Valuation Office Agency (VOA). Values are based on the market rent for the property at a given date. Revaluations take place regularly. The current rateable values came into force on 1 April 2017 and are based on valuations as at 1 April 2015.
The business rates figure payable is the RV of the property multiplied by one of two Business Rates multiplier figures. The multiplier figures are set by central government and increase each year in line with inflation. There is a lower multiplier figure for small businesses.
What can I do if I think the rateable value is wrong?
You can ask the VOA to change the RV if there is a mistake – for example, if their records show an incorrect figure for the floor area. You can also challenge the valuation if other comparable properties in the area have a lower RV. For more information, see GOV.UK
Do all small businesses need to pay Business Rates?
While all small businesses need to register for business rates, discounts of up to 100% are available through the Small Business Rate Relief scheme.
Discounts are based on the rateable value, NOT on the actual rent you pay, and are calculated on a sliding scale. You will get the full 100% discount
Small Business Rate Relief for businesses occupying one property: you can get a discount if the property’s RV is below £15,000. If the RV is below £12,000, you’ll get the full 100% discount.
Small Business Rate Relief for businesses occupying several properties: you can get a discount on the main property if the RV of the main property is less than £15,000, the other properties all have individual RVs of less than £2,900, and the total RV of all the properties is less than £20,000.
Bear in mind the Small Business Rate Relief scheme is subject to change – we’d recommend not taking on premises if you can only afford them with the relief in place.
Other Business Rate reliefs are applicable in particular circumstances. Some are mandatory (which means your council must give you the relief if you are eligible) and some are discretionary. To find out more, see GOV.UK
Do I have to pay Business Rates on an empty building?
Your local council will give you Empty Property Relief for the first 3 months a building is empty (6 months for industrial premises). After that, the full amount is normally due. There are some further exemptions for very specific circumstances, including for listed buildings and properties with a RV of less than £2,900.
Where does the money from Business Rates go?
Local councils collect the money and keep a percentage to fund the services they provide. You don’t as a business get anything specific for the rates you pay (the rates don’t, for example, cover business waste collection).
The rest of the money collected goes to central government, who then share out the total business rates pot with councils across the country according to the population in each area. The system is gradually changing. Central government is cutting grants to councils but letting them keep more of the business rates they collect.
Who should I contact to register for Business Rates or if I have questions?
For any queries about Business Rates, contact your local council Business Rates department.
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