Business Rates
What are Business Rates?
Business rates are the way in which businesses contribute towards the cost of local authority services. Business Rates (also called Non-Domestic Rates) are an annual tax on commercial property and can be a significant proportion of occupancy costs, so understanding how the system works is important in managing rates costs.
Who pays Business Rates?
The occupier of a property, either as owner-occupier or tenant, normally pays the Business Rates, although the landlord may contract to do so on behalf of the occupier.
When do business rates have to be paid?
Rates bills are sent out annually by local authority between February and April. The bill shows the amount to pay in instalment for the coming year and how the local authority has calculated the rates.
How are Business Rates calculated?
The local authority calculates business rates by multiplying the Rateable Value of a property by a factor set by central Government (expressed as pence in the pound) called the Uniform Business Rate (UBR) or multiplier. The local authority calculates the amount that should paid in business rates, adjusted to include any relief or transitional adjustment that the business is entitled to.
What is the Uniform Business Rate?
The Uniform Business Rate (UBR) or multiplier is set by central Government. The UBR increases by the rate of inflation each year except in a year of new Rateable List. The local authorities multiply the UBR by the Rateable Value to calculate a property's rates bill. The new multipliers for 2007/08 have been provisionally announced. The small business multiplier is proposed at 44.1p, the standard multiplier is proposed at 44.4p.
What is the Rateable Value?
Every non-domestic property has a Rateable Value determined by the Valuation Office Agency (VOA) every five years and is based on "the annual rent a property is likely to be let for on the open market at a set date". Having a set valuation date ensures that the value of all properties is assessed at the same fixed point in time to ensure fairness for all ratepayers.
The rateable values of all non-domestic properties are published by the Valuation Office Agency in the Rating List every five years and are based on market values two years prior to the list. The current Rateable List came into effect on 1 April 2005, using the valuation date of 1 April 2003.
What is a the rateable value and rates payable on a specific property?
The 2005 Rateable List can be searched online to find a specific property's rateable value; see www.ratinglists.voa.gov.uk/irl2k5/index.jsp
To calculate the rates payable multiply the property's rateable value by the UBR, and reduce any relief that may be available (see below for details of relief). See the end of this page for examples of how the calculate rates payable
What is the Summary Valuation?
The summary valuation explains how the rateable value of the property has been calculated based on the characteristics of the property. A summary valuation is not a rates bill. The VOA sent a paper copy to most ratepayers in October 2004 in advance of the 2005 Rating List. If the rateable value is re-assessed and changed by the VOA, an updated summary valuation that reflects any amendments will be sent.
Can the Rateable Value of a property by challenged?
The summary valuation or rateable value of a property can be queried directly with the Valuation Office Agency free of charge. Alternatively a rating agent can be employed to carry out the appeal.
If the rateable value of a property increases, will the rates payable go up as well?
Any rise in a property's rateable value does not necessarily mean the rates bill will rise too. This is because the multiplier is adjusted is adjusted downwards following a revaluation to offset the overall rise in values. Some ratepayers, however, could see some dramatic changes in their rates bill - if this happens to your rates bill, it will probably be affected by transitional arrangements.
The rates payable on a property have increased significantly, is there anything that can be done to reduce the increase?
If the rates payable on a property rises significantly on revaluation, it may be protected by transitional arrangements. These limit the percentage by which a rates bill can increase or decrease in a single year. Transitional arrangements are based on the change in a rates bill from 2004/05 to a new rates bill in 2005/06. They are not dependent on the change in the property's rateable value itself and the level of relief will depend on whether the property is eligible for the Small Business Rate Relief scheme.
Do small businesses have to pay business rates?
If a property has a rateable value less than £21,500 (£15,000 outside of Greater London) business may benefit from the Small Business Rate Relief scheme. Eligible businesses with rateable values of below £5,000 will get 50% rate relief on their liability. This relief will decrease on a sliding scale by an estimated 1% for every £100 of rateable value over £5,000, up to £10,000. The local billing authority will calculate the exact decrease. Small businesses will need to register for eligibility with their local authority.
Are Business Rates payable on empty properties?
Where a property is empty the owner or leaseholder will pay a reduced rate. No business rates are payable for the first three months that the property is empty and, after that, an empty property rate of 50% of the normal bill. For industrial buildings, listed buildings and small properties with rateable values of less than £2,200, there are no rates to pay even after the first three months.
Are Business Rates payable on part of a property is not being used?
The billing local authority may consider giving relief, and reduce the rates payable on the part of the property that is clearly unoccupied and beyond use for a short period of time. The local authority can choose to ask the VOA to divide the current rateable value between the parts of the property that are occupied and those which are not occupied. If an application for this rate relief is succesful, you will pay full rates on the occupied part of the property and 50% in respect of the unoccupied part.
Do I have to pay business rates if I work from home?
If you are working from home your local authority may charge business rates for the part of your property used for work, and you will have to pay Council Tax for the rest of the property. It will depend on the circumstances of each case and you should check with your local Valuation Office Agency office for advice.
Do charities have to pay business rates?
If the property for charitable purposes, there is an automaticlaly entitlement to an 80% reduction on the rates payable. The local authority may also decide to further reduce the amount payable - decisions are made on a case-by-case basis.
Not a charity, but another type of non-profit-making organisation?
Although not automatic entitlement, local authorities can decide to give relief or cancel rates bill altogether. The organisation must be non-profit-making and the property it occupies must be used for charitable, philanthropic or religious purposes or concerned with education, social welfare, science, literature or the fine arts.
For further information on Business Rates see the Business Link website: www.businesslink.gov.uk/business rates
