Business Rates - An Introduction
What are Business Rates?
Business Rates are a central government tax levied on the occupants of commercial and industrial properties (e.g. offices, shops, pubs and warehouses).
Who sets Business Rates?
Business rates are set by central government. It sets the multiplier, which is then applied to the rateable value – an estimate of the open market rental value a property could achieve on a particular date.
Local authorities collect the Business Rates due (in their area), on behalf of central government. A proportion of these funds are then redistributed back to local authorities – the exact amount is determined by a population-based formula.
Who pays Business Rates?
The party entitled to possession of the premises is responsible for paying business rates. This will usually be the owner or the tenant.
How much are Business Rates?
This depends on two figures: the rating multiplier (a pence-in-the-pound value) and the Rateable Value (RV) of your property.
In England and Wales, the RV is based on the rental value of the property in the open market, as calculated on 1 April 2017 - an estimate calculated by the Valuation Office Agency (VOA). In Scotland, the Scottish assessor sets the rateable value.
When do you pay Business Rates?
Business Rates are an annual bill paid in ten equal instalments. Your local council will send you a bill in February or March each year.
How to calculate Business Rates
You can work out your business rates bill by multiplying the rateable value of your property by the rating multiplier, including any supplements, and then adjusting it for any discounts, reductions or transitional arrangements, which apply to you.
Your property's RV can change
The RV of a property could change for a number of reasons including:
- The size of the premises has changed, as a result of an extension or other alteration
- The use of the premises has changed
- An appeal, lodged against an assessment of the property after a revaluation, could prove successful
- Combining the premises with a next door property, could result in assessments being merged
- Splitting combined properties it into two or more units – each one might be reassessed for its own Business Rates liability.
Challenging a Business Rates assessment
Every Business Rates payer has the right to challenge a Rates demand received. In England, the Business Rates appeal process is known as ‘Check, Challenge, Appeal’.
All ‘Checks’ and ‘Challenges’ are dealt with by the Valuation Office Agency (VOA), via its online service. ‘Appeals’ are referred to a Valuation Tribunal.
The process is technical and can be time consuming, which is why most ratepayers appoint Business Rates specialists to manage the process on their behalf.
If you pay Business Rates, you may receive a request for rental information or on certain properties, turnover information, from the VOA, to ascertain the Rateable Value of the property.
It is vital that this document is completed and returned, as failure to do so could result in a fine.
The VOA will review the factual information provided at the initial ‘Check’ stage (eg floor areas) for accuracy – against its own record of the property.
The VOA has 12-months to complete a Check: if any of the information is false, the ratepayer could face a fine.
If the ratepayer concludes that the assessment remains high after the ‘Check’ stage, the RV (on which the assessment is based) can be challenged. This must be completed within four months of receiving the conclusion of the ‘Check’ process.
The ‘Challenge’ must include a valuation of the premises supported by evidence. It is important that the appeal comprises a comprehensive and well-articulated argument, as referencing relevant case law and legislation.
The VOA has 18-months to consider the Challenge. If no resolution is reached, the case may be escalated to the ‘Appeal’ stage.
An ‘Appeal’ must be made to the Valuation Tribunal within four months of the VOA issuing its decision at the end of the ‘Challenge’ stage. The evidence submitted in the Challenge process, must also be used at the ‘Appeal’ - which is why the accuracy and cogency of evidence submitted, is vital.
Given the complexity of the process and the financial ramifications of the outcome, most Rates payers appoint a Business Rates professional to help them.
Looking for business rates advice? Get in touch with one of our specialists.
Business Rates Relief
Under certain circumstances, Business Rate payers could be entitled to relief on their Rates demands.
In England, the Government has set several mandatory reliefs, which billing authorities (District and Unitary Councils), must make available to eligible ratepayers. It is the billing authority’s responsibility to decide whether a ratepayer is eligible for relief or not.
If the occupier of a property changes, the relief which is available in respect of the property, may also change.
In Scotland, Wales and Northern Ireland, the Devolved Administrations set mandatory reliefs.
In addition to the Government’s and the Devolved Administration’s discretionary relief from Business Rates during the COVID-19 pandemic in financial years 2020/21 and 2021/22, other relieves exist such as:
- Small Business Rate relief
- Rural rate relief
- Charitable rate relief
- Enterprise zones
- Exempted buildings and empty buildings relief
- Hardship relief
- Transitional relief
- Retail discount
- Local newspaper relief
- Nurseries discount
Do I have to pay Business Rates?
Although some types of property are exempt (e.g. agricultural land and buildings), most non-domestic properties will attract business rates.
Failure to settle the Business Rates demand in full, or failing to address the subsequent reminders within seven days, will result in the council demanding an immediate settlement of the outstanding amount in full.
Failure to comply with this request, could result in the council starting legal proceedings and applying to the Magistrates’ Court for a liability order.
Selecting a Business Rates Advisor
Beware overzealous Business Rates advisors and companies who make tantalising claims about securing eye-watering reductions in your Business Rates liabilities.
Whoever you select, make sure they are RICS registered and have a proven and relevant reputation and track record.
Alternatively, you can contact Chris Morrow, Head of our Business Rates Advisory team.