Business rates are a crucial part of the UK’s tax system, levied on most non-domestic properties, including offices, shops, warehouses, and pubs. These rates can have a significant impact on a business’s financial health, so it’s important to understand how they are calculated, how to access your rateable value, and what to do if you believe your rates are too high. In this blog, we’ll explore key aspects of business rates, including how they are assessed, who is responsible for paying them, and how to appeal your bill if necessary.
What Are Business Rates and Who Sets Them?
Business rates, also known as non-domestic rates, are charged by local authorities on properties used for commercial purposes. The rateable value of a property is determined by the Valuation Office Agency (VOA), which is part of HMRC. The local council then uses this value, along with a government-set multiplier, to calculate the business rates owed.
The VOA is responsible for assessing approximately 2.1 million commercial properties in England and Wales. This process ensures that the rateable value of a property reflects its market rental value at a specific point in time. The most recent revaluation was conducted in April 2023 to ensure that property values are current and accurate.
How Is Rateable Value Calculated?
The VOA calculates the rateable value of a property based on its estimated annual rental value in the open market. This is done by considering various factors, such as the property’s location, size, and use. In some cases, the VOA may request specific information from property owners about the property’s rental or ownership details. It’s important to comply with these requests, as providing accurate information is required by law.
The VOA uses different methods to assess rateable value, including rental comparison, contractor’s basis, and examining business receipts and overheads. This process ensures that properties are valued fairly and consistently.
How Are Business Rates Calculated?
Once the VOA has set the rateable value, local councils calculate the business rates by applying the appropriate multiplier to this value. The multiplier is a figure set by the government that determines how much businesses will pay based on their property’s rateable value. The council then sends the business rates bill to the property owner, who can appeal the assessment if they believe the rates are too high.
What Is Revaluation and Why Is It Done?
Revaluation is the process by which the VOA updates the rateable value of all non-domestic properties. The aim is to reflect changes in the property market, ensuring that business rates are calculated based on current market conditions. Revaluations occur periodically, with the most recent one taking effect in April 2023.
During a revaluation, the VOA may request updated information from property owners. This ensures that the rateable value is accurate and up-to-date, and that the final business rates bill is fair.
How to Access Rateable Value and Business Rates?
You can check the rateable value of your property and get an estimate of your business rates bill using the online service provided by the VOA. Property owners can log in with their reference number and an online key found on their latest business rates bill or recovery notice. This service allows businesses to access information on their rates and keep track of any changes.
How to Appeal and Report Changes?
If you believe your business rates assessment is incorrect, you can appeal directly to the VOA. You can update your property details or dispute the valuation through your business rates valuation account. It’s important to continue paying your business rates while the appeal is being processed. If the appeal is successful, any overpaid amounts will be refunded.
Appealing business rates is free, and you do not need a representative. If you have questions about your bill or are unsure whether you qualify for relief, you can contact your local council for assistance.
Who Pays Business Rates?
Business rates are typically paid by businesses that occupy non-domestic properties. This includes a wide range of property types, such as:
- Shops
- Offices
- Warehouses
- Hotels
- Pubs
- Factories
If a property is used for both residential and business purposes, business rates will be applicable to the business part of the property.
Who Is Exempt from Paying Business Rates?
Some properties are exempt from business rates. Common exemptions include:
- Agricultural land and properties
- Buildings used for the training or support of disabled individuals
- Religious buildings, such as churches or halls used for worship
- Home-based offices, provided only a small portion of the home is used for business purposes
These exemptions are in place to support businesses that contribute positively to the local community or have specific needs.
How Do You Pay Business Rates?
Business rates are typically billed by local councils in February or March for the upcoming tax year. Payments can be made online, via direct debit, at a Post Office, or through BACS transfer. Businesses can usually spread their payments over 10 months, but they can also request a 12-month payment plan if needed.
What Are Business Rates Reliefs?
There are several types of business rates relief available to businesses in the UK. These reliefs are designed to reduce the financial burden on certain businesses, such as small businesses, charities, or those in rural areas. The eligibility criteria for these reliefs can vary depending on the property’s location and the nature of the business.
Common types of business rates relief include:
- Small Business Rate Relief: Available for businesses with a small rateable value.
- Charity and Non-Profit Rate Relief: For registered charities or community-based organizations.
- Retail, Hospitality, and Leisure Relief: Provides a discount for businesses in these sectors.
- Hardship Relief: Available for businesses experiencing financial difficulties.
- Empty Property Relief: Reduces business rates for properties that are vacant.
Conclusion
Business rates are an important consideration for any business owner occupying non-domestic property in the UK. Understanding how rates are calculated, how to access your rateable value, and how to appeal a business rates bill are key to managing your obligations. Be sure to stay informed about potential reliefs and exemptions that could help reduce your business rates bill. If you’re unsure about any aspect of your business rates, seeking professional advice can ensure you’re paying the correct amount.
