The Ultimate Guide to Business Rates for SME's

If you’re currently occupying a commercial property, there’s a good chance that you will be liable for business rates. Understanding business rates can be complex, but it doesn’t have to be. Read Utility Saving Expert’s ultimate guide on business rates to find out everything you need to know.

We will cover frequently asked business rates questions such as:

What are business rates?
How are they calculated?
What is business rates revaluation?
How do I make payments?
What is business rate relief?
What happens if my business or premises change?
Local disruption
Do I still pay if I work from home?
What if my business rates have been calculated incorrectly?
How do I contact the Valuation Office Agency?
Business rates calculator

What are business rates?

Business rates is a tax that is based on the rateable value of any given commercial property. This tax will reflect what the rental value of the property would be.

Examples where business rates are applied to non-domestic properties include the following:

Offices
Shops
Public houses
Factories
Holiday rental homes / guest homes
Warehouses

There’s a good chance that you will have to pay business rates if you’re using a building or part of a building for any non-domestic use.

How are they calculated?

Commercial properties that have been assessed will be given a rateable value (RV). The rateable value of the property will be set by the Valuation Office Agency (VOA) of HM Revenue and Customs. To calculate the business rates of any commercial property, you must multiply the rateable value by the Uniform Business Rate (UBR).

The rateable value is the open market rental value on 1 April 2015, which is based on an estimate by the Valuation Office Agency (VOA).

Business rates are calculated differently for those in Scotland or Northern Ireland.

What is business rates revaluation?

At each revaluation, the Valuation Office Agency (VOA) will adjust the rateable value of the business property in accordance with any property market changes.

This will usually take place every 5 years. The most recent revaluation took place on 1st April 2017, and was based on rateable values from 1st April 2015. Business rates are handled differently in Scotland and Northern Ireland.

The following happens each time revaluation takes place:

Commercial properties are given a new rateable value
Multipliers used for calculations are revised

Remember, that a change to your property’s rateable value doesn’t necessarily mean you will see a change to your bill.

You can ensure rateable valuations for your property are correct by providing the Valuation Office Agency (VOA) updated rental costs for your property each time revaluation takes place.

How do I make payments?

If you’re currently occupying a commercial property, you will most likely receive a rate demand from your local authority in February or March each year. This will be for the following tax year.

You will be given the option to pay your business rates over 10 monthly instalments. The occupier of the property is liable to pay business rates. If you’re a tenant, make sure to check with the landlord to see if business rates have been included as part of your rental agreement.

Empty and partly occupied properties

You will not be liable to pay for business rates for the first 3 months if the property is empty. For industrial properties and warehouses, you will not have to pay for the first 6 months. Once this period lapses, properties that are empty will now be liable for business rates at the full 100%. The amount will differ if the property in question is a listed building, or the rateable value is below £2,600.

If the commercial property is only partly occupied, the local authority will make a decision on whether to apply a business rate relief.

What is business rate relief?

If you meet the eligible criteria, you can apply for business rates relief. If the commercial property is occupied by a charity, you are entitled to 80% mandatory business rate relief. If you’re a non-profit organisation, you may be eligible for up to 100% discretionary business rate relief. You will need to apply for this through your local authority, they will decide on this.

Other exemptions

Some types of properties are exempt from paying business rates. These include the following:

Farm buildings
Buildings used for disabled people
Buildings used for welfare

What is small business rate relief?

If your business occupies a ‘small’ property, you may be eligible for small business rates relief.

Small business rate relief was introduced in 2010, the scheme provides a reduction on your business rates if you meet the eligible criteria.

if the rateable value of your commercial property is below £15,000, you’ll be eligible for small business rate relief.

With the 2017 revaluation taking place, for properties that now no longer meet the qualifying criteria for business rates relief, there are new caps on the amount you can expect to pay for a certain period. If applicable, until 31 March 2018, your rates will not increase by more than £50 per month.

If the property’s rateable value is £12,000 or less, you won’t have to pay business rates. For properties that have a rateable value of £12,001 to £15,000, the rate of relief will gradually decrease from 100% to 0%.

What is rural rate relief?

If your business is in a rural area with a population of less than 3,000 people, you may be eligible for rural rate relief. If your business does meet the criteria, you won’t have to pay business rates if:

The only post office or village shop has a rateable value of up to £8,500
The only petrol station or public house has a rateable value of up to £12,500

Contact your local authority to see if you meet the qualifying criteria before applying for rural rate relief.

What is charitable rate relief?

If you run a charity or community amateur sports club, you can apply for charitable rate relief of up to 80% if the non-domestic property is used for a charitable cause.

You can check if you’re eligible by contacting your local authority, they may even be able to provide you with a discount of up to 100%, this is known as ‘discretionary relief’.

However, if you find out you’re not eligible for charitable rate relief, there’s a chance that you may still be eligible for discretionary relief if you’re a not for profit or voluntary organisation.

Enterprise zones

If you plan to start a new business or you’re relocating to an enterprise zone, you may be eligible for business rates relief.

You could potentially receive up to £55,000 a year over 5 years, your local authority will be able to calculate how this relief would be applied to your business.

Exempted buildings relief

There are some properties that are exempt from business rates altogether. These include the following:

Agricultural land and buildings, these include fish farms
Buildings that are used for training or the welfare of disabled people
Buildings that are registered for public religious worship e.g. churches and mosques

Remember that strict legal requirements will apply for any of the above exemptions.

Empty property relief

You won’t have to pay business rates for buildings that have been empty for up to 3 months. Once the 3 months lapse, most businesses will be expected to pay full business rates.

Here are some examples of properties that could receive ‘extended empty property relief’:

Industrial premises – warehouses are exempt for an additional 3 months
Listed buildings – until they are occupied again
Buildings that have a rateable value below £2,900 – until they’re reoccupied
Properties owned by charities – only if the property’s next use will mostly be for charitable purposes
Community amateur sports club buildings – only if the next use will mostly be as a sports club

If your property is due to become vacant or is already vacant, contact your local authority to make them aware as soon as possible.

What is hardship relief

Throughout England, local authorities have the discretion to reduce your business rates bill with hardship relief.

To qualify, you must satisfy your local authority through the following:

You would be placed in financial hardship without this relief
Providing hardship relief to you is in the interest of local people

If you meet the above, contact your local authority to explain the circumstances and you may be able to receive hardship relief.

What is transition relief?

Transition relief allows any changes in regards to your business rates bill to be gradually phased in, rather than a significant increase taking effect straight away. This will make it easier for your business to manage from a financial perspective.

What about relief for pubs?

If you’re a pub in England and your rateable value is below £100,000, you’ll receive a £1,000 reduction on your business rates bill. This relief is available for the following tax years: 2017 to 2018 and 2018 to 2019.

What happens if my business or premises change?

Here are a few examples where your business rates could change:

You move property or make changes to your current property
The nature of the business you’re in changes
You have decided to sublet part of the commercial property
You have decided to merge two or more properties into one single property

If you do make any changes to your business or premises, you need to report these changes to the Valuation Office Agency (VOA) as soon as possible. This will ensure you’re paying the correct amount. Failure to do this could result in your business rate bill being backdated.

Local disruption

If your business premises have been affected by any local disruption, you may be able to receive a temporary reduction in your business rates bill.

Here are a few examples of disruption to businesses:

Building works
Road works
Fire
Flooding
Storm

If you would like to apply for a temporary reduction, you must contact the Valuation Office Agency (VOA) service.

Do I still pay if I work from home?

If you’re working from home, you won’t have to pay business rates in most cases. If you have a home-based business, you won’t usually have to pay if:

You’re using a small part of your home for business e.g. use of a room as your office
You sell items by post e.g. online store

However, you may have to pay for business rates in addition to council tax for the following reasons:

The property in question is part business and part domestic e.g. you reside above a shop
Goods and/or services that you sell are provided to people who visit your property
You employ other people who will work at your property
You’ve made modifications to your property for business purposes e.g. your garage or any other outer buildings have been converted to a repair shop or beauty salon

If you’re unsure as to whether you should be paying business rates, we recommend contacting the Valuation Office Agency (VOA) to find out more.

Public houses and licensed trade

The Valuation Office Agency (VOA) service will calculate the rateable value based on the annual level of trade (excluding VAT) that a public house would be expected to achieve if it were operated in an efficient and reasonable way.

This rateable value is referred to as ‘fair maintainable trade’, and is based on the following factors:

What type of pub or licensed premises it is
The pub or licensed trade’s location
What services does the pub or license trade offer e.g. food and drink, gaming activities, or screening of sporting events such as football or rugby

The Valuation Office Agency (VOA) will look at both outgoing rental costs and business turnover to calculate a ‘fair maintainable trade’. A percentage will be applied to work out what the rateable value would be for the commercial property. Any percentages are agreed with the British Beer and Pub Association (BBPA), and are listed in the VOA’s pub guide.

If you want to check what figures are currently being used, or you’re in disagreement, you must contact the VOA for clarification. It will be useful to have some details beforehand, ensure you have details of business turnover (excluding VAT) for all sources of income, this includes food, liquor, and gaming.

Self-catering and holiday let accommodation

Properties in England that are available to let for 140 days or more each year will be rated as a self-catering property. They will also be valued for business rates.

Properties in Wales that are available to let for 140 days or more each year and are actually let for more than 70 days will also be rated as a self-catering property. They will also be valued for business rates.

The Valuation Office Agency (VOA) will calculate business rates based on a number of different factors, these include the following:

What type of property it is
The size of the property
Where the property is located
Number of people that reside and sleep at the property

Note: the term ‘single bed space’ is used to identify how many people are able to sleep at the property.

What if my business rates have been calculated incorrectly?

In some instances, it’s possible for your business rates to have been calculated incorrectly. The amount you’re paying right now or the amount you are required to pay may need to be adjusted.

If you believe that your business rates have been calculated incorrectly, check the VOA’s rateable value for the property. It’s also a good idea to compare it with other properties in your area that are similar. After checking this, if you’re still not satisfied, you should then apply to have them recalculated.

Check and apply for your rateable value to be recalculated.

How do I contact the Valuation Office Agency?

You can contact the Valuation Office Agency (VOA) through a number of different methods.

If you wish to write to the VOA, you can send them a letter at the following address:

Valuation Office Agency
Rent Officer Functions
Customer Service Centre
Wycliffe House
Green Lane
Durham
DH1 3UW
United Kingdom

Need to speak to someone over the phone at the VOA? Here are the contact numbers:

Telephone (England) – 03000 501501

Telephone (Wales) – 03000 505505

The office opening hours are as follows:

Monday to Friday – 8:30am to 5:00pm
Closed on bank holidays

If you would like to send the VOA an email, send your message to: NSOhelpdesk@voa.gsi.gov.uk

Visit the Valuation Office Agency’s website directly at: https://www.gov.uk/government/organisations/valuation-office-agency

Follow the Valuation Office Agency on Twitter at: https://twitter.com/VOAgovuk.

Business rates calculator

If you wish to calculate your business rates bill yourself, you can get an estimate online. First of all, you must find out what your property’s rateable value is, you can find this information here: https://www.gov.uk/correct-your-business-rates.

Depending on your property’s rateable value, you will then need to multiply this with the correct Uniform Business Rate (UBR). Once you have done this, subtract any business rate relief that you’re entitled to. This should give you a rough estimation.

You can use the UK Government’s business rates calculator to estimate what your business rates are likely to be.

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