Are Schools, Colleges and Universities Liable for Business Rates?

When it comes to business rates, many people assume that education providers are exempt. However, that’s not quite the case.

Whether a school, college, or university is liable depends on how it is funded and whether it qualifies for relief.

In England and Wales, schools (like most other non-domestic properties) are liable for business rates. But how these rates are calculated, and what they mean in practice for education providers, can be complex.

Adam Barnfield, Head of Business Rates at Vail Williams, explains.

State-Funded Schools

Maintained schools, academies, and free schools are technically liable for business rates, but the cost is covered centrally by government.

Since April 2022, the Department for Education has been responsible for paying business rates directly, meaning schools themselves don’t usually see a bill.

Independent Schools

Independent (private) schools are liable for business rates in the same way as other non-domestic occupiers.

Colleges and Sixth-Form Colleges

Further education and sixth-form colleges must pay business rates. Where colleges have charitable status, they too can access charitable rate relief, reducing their liability.

Universities

Universities are also liable for business rates on their teaching, research, and administrative buildings.

How are business rates calculated for schools?

Every non-domestic property is given a Rateable Value (RV) by the Valuation Office Agency (VOA).

This RV broadly represents the annual rental value the property could achieve on the open market at a set valuation date.

For schools, however, the VOA uses different methods to arrive at this figure:

• Contractor’s Test Method

  This considers the cost of constructing the buildings, adjusted for age, location and condition, and then “decapitalised” into a rateable value.

• Receipts and Expenditure Method

  In some cases — particularly where a school or college generates income — the VOA may apply this approach, based on financial performance.

Unlike many commercial properties, a traditional rental comparison is rarely possible, as schools are not typically let out on the open market.

What do schools, colleges and universities need to do?

Business rates can represent a significant outgoing for educational institutions, particularly for those not directly funded by government support. Reliefs can make a substantial difference to costs, but eligibility is complex and varies by institution type.

Not only this, inaccuracies in assessment can lead to institutions paying too much (or too little, which carries its own risks).

A proactive review can safeguard against unnecessary costs and ensure compliance with new reporting requirements.

At Vail Williams, our specialist business rates team works with education providers and property occupiers across the UK to ensure they are paying the correct amount — and to identify opportunities for relief or savings.

We can:

• Review your school or college’s valuation in detail
• Identify and challenge inaccuracies
• Support with compliance under Duty to Notify
• Reduce your rates liability where possible.