We understand that the world of business rates can be a complicated one, and yet another unnecessary burden on businesses.
That is why our business rates advisers have pulled together a beginner’s guide to business rates, to help answer the most frequently asked questions we are approached with by businesses.
We hope you find this helpful, and if you would like to discuss a particular business rates issue with our business rates team, get in touch with a member of the team.
Like Council Tax, Business Rates are a form of taxation applicable to most non-domestic properties.
The Valuation Office Agency (VOA) is responsible for applying a Rateable Value (RV) to a property and based on that figure, the Council calculates how much your business rates liability will be on an annual basis.
The VOA issues “Request for Lease Information” forms on a regular basis for completion by the ratepayer.
Two years before the start of a new Rating List they consider the key rental evidence provided applying a hypothetical question of “if the Landlord and Tenant negotiated a rent what would the outcome be” to then be used to formulate the Rateable Value for the new Rating List. This is known as the Antecedent Valuation Date (AVD).
What you pay in business rates is calculated by multiplying the Rateable Value (RV) of your property, which is based on property rental values from April 2021, by a formula called the ‘Multiplier.’
At the Autumn Statement, we received the welcome news that the small business rates multiplier will be frozen at the same rate as this year.
However, the standard multiplier for all medium and large properties will be increased to 54.6p in line with increase in September’s consumer price index (CPI) figure.
In addition to this calculation, you may be subject to paying supplements or you might even be eligible for reliefs which can be deducted from your liability.
As mentioned above, business rates are calculated by taking the Rateable Value (RV) of a property and multiplying it by the ‘Multiplier.’
For the current 2023 financial year the multiplier has been set by Government at 0.499. This calculation is known as the “Notional Amount.” If the RV on a property has increased significantly going from the previous 2017 Rating List to the current 2023 List (following “Revaluation”), it would be unfair for the ratepayer to pay such a large increase in business rates immediately.
Therefore, the increase in your charge would be phased in over the period of the Rating List until you are paying the correct amount i.e. the notional charge. This is known as Transitional Relief.
In addition to the Transitional Scheme, there are numerous surcharges and reliefs which may be added or deducted dependent on the ratepayer’s eligibility.
If you are required to pay business rates, this is a tax liability that you must, indeed, pay.
However, there are potential reliefs that may be available to you, depending on your circumstances, which can reduce the amount you have to pay. A business rates expert can explore the potential reliefs you might be eligible for.
There are numerous business rates reliefs which, if eligible, could help to reduce the amount of business rates you pay to your local Council.
If your property is totally empty and you remain the rateable occupier, you may be able to request this relief which would provide a three-month rate-free period for shops and offices, or a six month rate-free period for industrial warehouses, workshops, factories.
It is worth noting that this relief is applicable to the property and not the ratepayer, so it may be possible the previous tenant or landlord may have already claimed the total rate free periods or there may be only a residual amount left to claim.
However, with expert advice, there are ways of using the existing legislation to circumvent this.
If you are the liable party for business rates but are not using all the space within the property, then you may be eligible for partial empty rate relief.
For example, if you have an office suite within a warehouse which it totally empty, the VOA would apportion the amount of RV applicable to that vacant part and advise the Council, who in turn will apply the relevant relief and recalculate your rates liability.
Industrial properties could benefit from a six-month rate-free relief on the empty part or a three-month rate-free period on retail, offices.
This relief applies to properties in the retail, hospitality and leisure sectors which are predominantly used by and available to the public, such as restaurants, cinemas, gyms.
If eligible, it could reduce your rates liability by 75% for the current 2023 financial year but this is capped at £110,000 per business per year.
Following the Autumn Statement, the Chancellor has confirmed he will be retaining this provision for the 2024 financial year.
There are many businesses which may not deem themselves as being in this sector, but it would be worthwhile speaking to a business rates specialist as there are circumstances where this can be argued.
Most reliefs, however, are discretionary and Councils may take a differing view on which circumstances they would/would not grant such relief for.
It is worth noting that all business rate reliefs applied are discretionary. This means that Councils can refuse applications without explanation and, if an outgoing tenant/landlord has used the empty provisions, you will not be eligible to receive additional relief.
The Valuation Office Agency (VOA) is responsible for applying a Rateable Value (RV) to a property.
To determine the RV, they consider any rental evidence they have from 1 April 2021 known as the Antecedent Valuation Date (AVD), which is two years prior to the 2023 Rating List commencing.
The VOA also has a survey of the property which is broken down into Line Entries showing the area/m2 for each part of the property and the £/m2 applied to each part.
Based on this and their rental information, they calculate what they believe to be a fair and reasonable value should the property be vacant and to let on the open market.
Therefore, dependent on any alterations you may have implemented to the property, it could be possible that your RV is too high.
However, if you have extended the property or made any physical changes, the RV could also be subject to an increase.
It is therefore important that an independent survey is undertaken on a property prior to lodging an appeal to seek a reduction in RV, as many factors would need to be taken into consideration.
Following the COVID-19 pandemic, many companies have adopted flexible ways of working with some employees only going into the workplace a couple of days a week.
It is therefore possible to rearrange the way you utilise your workplace with the aim of designated parts becoming empty.
You may then be eligible for partial empty rate relief on the rooms not being used for either a three / six-month period, depending on whether yours is a retail or office building, or industrial.
If granted, this could help reduce the business rates you pay to the Council for a short period.
However, his is a discretionary relief provided by the Council and they can refuse to grant it, but this would be dependent on each circumstance.
Challenging the Rateable Value of the property is also an option with the aim of seeking a reduction if the VOA floor area calculations are inaccurate or the pricing applied per m2 is deemed excessive.
Also, if there are building works/roadworks affecting your property (to include your own) there may scope to lodge a Material Change in Circumstances (MCC) appeal seeking a reduction in business rates whilst the works are ongoing.
There are many different types of appeals, but a reputable business rates advisor would be able to seek the one that most suits your requirements.
If your Rateable Value (RV) is between £12,001 and £15,000, small business rate relief could be applicable on a sliding scale from 100% to 0%.
If the RV is between £15,001 and £51,000, you could benefit by not having to pay the small business rates supplement. If the Rateable Value is below £12,000, you may have 100% relief.
Small business rate relief does have certain criteria which needs to be met and the Council consider all the properties the business is paying rates on, so it is cumulative which may mean you are not eligible.
At the Autumn Statement (2023), we received the welcome news that the business rate multiplier will be frozen at the same rate as this year.
However, unfortunately, the standard multiplier for all medium and large properties will be increased to 54.6p in line with increase in September’s consumer price index (CPI) figure.
If your property does fall within the transitional scheme, it may mean an increase in your rates liability for next year, as the transitional relief applied each year reduces.
Council’s calculate business rates on a daily rate and then convert this to an annual charge (multiply by either 366 or 365 days).
They issue rates bills annually, with most of the ratepayers receiving their annual bills in March with the charge becoming due from 1 April.
Most Councils initially issue the annual bills showing ten monthly instalment amounts, for example, April to January. However, you can request the instalments to be paid over 12 months, which the Council will recalculate and issue a revised rates demand.
If a property becomes totally empty, there are provisions in place whereby a three month (for offices, retail) or six month (for industrial) empty rate period at 100% relief can be awarded.
However, after such period a full unoccupied rates liability will be applied by the Council, if indeed the property remains empty.
If you do reoccupy after the maximum period of relief, you would need to advise the Council who can update their records to show an occupied full rates liability.
There are ways of mitigating the full unoccupied rates liability, but we recommend you seek advice from a reputable advisor to discuss your individual circumstances.
If the building is listed or subject to a building preservation order, they would be exempt from paying business rates if the building was totally unoccupied.
This exemption would continue until the property becomes occupied again or is removed from the Rating List i.e. demolished.
For more information or for help and support with your business rates liability, get in touch.
