Business Rates Demystified: Your Comprehensive Guide

September 28, 2023 by Edward Walker

Businesses are an integral part of our society, providing products and services that fuel our economy and enrich our lives. However, running a business comes with responsibilities, and one such responsibility is paying business rates.

In this comprehensive guide, we will delve into the world of business rates, exploring what they are, who has to pay them, how they are calculated, and much more.

By the end of this article, you’ll have a clear understanding of this crucial aspect of running a business.

Table of Contents

What Are Business Rates?

Business rates, also known as non-domestic rates, serve as a means for those who inhabit commercial property that is also can be categorized as non-domestic to donate towards the cost of local usefulness.

These rates are administered and collected by local authorities, making them an essential source of revenue for municipalities.

One of the key features of the business rates system is the business rates retention arrangements, introduced in April 2013.

Under these arrangements, local authorities retain a portion of the business rates collected locally.

This retention serves as a direct financial incentive for local authorities to collaborate with businesses in creating a favorable environment for growth.

When businesses thrive, local authorities benefit from increased business rates revenues, which, in turn, are used to fund essential services provided by the council.

Who Has To Pay Business Rates?

In most cases, the occupiers of properties listed in the Valuation Office Agency’s (VOA) business rates lists are required to pay business rates.

These rates apply to a wide range of commercial (non-domestic) properties, including but not limited to shops, pubs, offices, warehouses, holiday rental homes, factories, and guest houses.

Even if a property is vacant, there is typically still a business rates charge, and it’s the responsibility of the owner, leaseholder, or freeholder to make the payment.

How Are Business Rates Calculated?

The calculation of business rates involves several key components:

Rateable Value: The rateable value of your business premises is determined by the Valuation Office Agency (VOA). This value is based on their assessment of the open market rental value of the property.

You can check the rateable value of your property online through the VOA’s website.

Multiplier: The amount of business rates payable is calculated by multiplying the rateable value by a specific ‘multiplier,’ which is an amount set by the government.

These multipliers can vary depending on certain factors and are displayed on the front of your bill.

Before each financial year, the government establishes two multipliers for England: the standard rating multiplier and the small business multiplier.

These multipliers play a crucial role in determining the final business rate amount.

Business Rates Instalments

Typically, business rate bills are set up for payment in 10 monthly installments.

However, regulations have been put in place to allow ratepayers to request 12 monthly installments, providing more flexibility in managing their payments.

National Non-Domestic Rating Multiplier

The government establishes two types of multipliers for each financial year: the national non-domestic rating multiplier and the small business non-domestic rating multiplier.

These multipliers are used in calculating business rates bills, except for the City of London, where special arrangements apply.

Ratepayers occupying properties with a rateable value not exceeding £50,999 (and not eligible for certain other mandatory reliefs or liable for unoccupied property rates) have their bills calculated using the lower small business non-domestic rating multiplier rather than the national non-domestic rating multiplier.

The multiplier for a given financial year is based on the previous year’s multiplier adjusted to account for the Consumer Price Index (CPI) inflation figure for the September preceding the billing year.

Rateable Value

Every non-domestic property, except those that are exempt from business rates, has a rateable value determined by the Valuation Office Agency (VOA).

This rateable value is displayed on the front of your bill and represents the yearly rent the property could have been let for on the open market on a specific date specified in legislation.

For the current rating list, this date was set as April 1, 2021.

It’s important to note that the VOA may adjust the valuation if circumstances change.

Ratepayers, as well as certain others with an interest in the property, have the right to check and challenge the valuation shown in the list if they believe it to be incorrect.

More information about the grounds for challenges and the process can be found on the VOA website.

Revaluations

Regular revaluations of non-domestic property rateable values are conducted to ensure that business rates bills accurately reflect current rental values and changes in rents.

The most recent revaluation took effect from April 1, 2023.

Revaluations play a crucial role in keeping the system responsive to evolving economic conditions.

They ensure that businesses are assessed fairly and that the rates they pay remain relevant in a dynamic market.

Business Rate Reliefs

Depending on individual circumstances, ratepayers may be eligible for rate relief, which reduces their business rates bill.

Various reliefs are available, some of which are permanent, while others are introduced temporarily by the government during Budgets.

Rate relief can provide significant financial support to businesses, making it essential for ratepayers to explore their eligibility for relief programs.

Subsidy Control

Starting from January 4, 2023, the UK implemented a new subsidy control regime to assist public authorities, which also include devolved administrations along with the local authorities, in providing subsidies tailored to local needs.

Public authorities must adhere to the international subsidy control commitments of the United Kingdom, and the legislation sets the framework for this new, UK-wide subsidy control regime.

For more information on the subsidy control regime, you can visit the subsidy control regime page of the GOV UK, which provides valuable insights into how subsidies are regulated and governed.

Rating Advisers

Ratepayers are not obligated to be characterized in discussions concerning their rateable value or rates bill.

However, those who choose to be represented should exercise caution.

Members of the Royal Institution of Chartered Surveyors (RICS) and the Institute of Revenues, Rating, and Valuation (IRRV) are qualified and regulated by rules of professional conduct designed to protect the public from misconduct.

Before hiring a rating adviser or company, it’s crucial to verify their qualifications, expertise, and insurance coverage.

Taking these precautions can help ensure a smooth and reliable partnership in navigating the complex world of business rates.

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FAQs (Frequently Asked Questions)

After perusing this article, I trust you’ve acquired the information you sought.

Should you harbor any additional inquiries or require further clarification, please don’t hesitate to post your queries in the comment section.

I’ll promptly provide you with the answers you seek.

In the interim, take a moment to explore some of the frequently asked questions below; you might find them quite insightful.

Q1: How are Business Rates Calculated?

Business rates are typically calculated based on the property’s rateable value, which is assessed by the government, and a multiplier set by local authorities.

The formula is Rateable Value x Multiplier = Business Rates.

Q2: How Much Are Business Rates?

The amount of business rates you pay depends on your property’s rateable value and the local multiplier set by your local authority.

There’s no fixed amount, as it varies by location and property.

Q3: What is The Business Rate?

Business rates, also known as non-domestic rates in the UK, are taxes levied on non-residential properties such as shops, offices, factories, and warehouses.

These rates are a significant source of revenue for local authorities and are calculated based on the property’s rateable value and a multiplier set by the government.

Businesses are required to pay business rates to their local council to support local services and infrastructure.

Q4: How to Avoid Business Rates?

You cannot completely avoid business rates if you have a taxable property.

However, you can explore exemptions, reliefs, or discounts available in your region and consider legal ways to minimize your property’s rateable value, such as property improvements or appealing your property’s assessment.

Consult a tax professional for specific advice tailored to your situation.

Q5: Do I Qualify For Small Business Rate Relief?

Eligibility for Small Business Rate Relief (SBRR) varies by location and specific criteria set by local authorities.

Typically, small businesses with a low rateable value may qualify.

To determine if you qualify, contact your local council or check their website for details and application procedures.

Q6: How To Avoid Business Rates on Empty Property?

To avoid business rates on empty property, you can explore the following options, which may vary by location:

Empty Property Rate Relief: Some regions offer temporary relief for empty properties. Check with your local council for any available exemptions or discounts.
Property Use Change: Consider changing the property’s use to one that qualifies for exemptions, such as residential use or charity use.
Property Occupation: Occupy the property yourself or lease it to another party, as some exemptions may apply when a property is in use.
Property Development: Start a renovation or redevelopment project, as some areas offer exemptions for properties undergoing substantial work.
Speak with Local Authorities: Consult your local council or a tax professional for guidance on specific strategies and options available in your area.

Remember that regulations and options can vary by region, so it’s essential to understand the rules and requirements specific to your location.

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To Conclude

In conclusion, business rates are a fundamental aspect of running a business in the UK.

They contribute to the funding of local services and play a significant role in the financial health of local authorities.

Understanding how business rates are calculated, who is responsible for paying them, and the various relief programs available is essential for business owners.

Additionally, staying informed about revaluations and subsidy control is vital in navigating the ever-changing landscape of business rates.

By being well-informed and proactive, businesses can better manage their financial obligations and contribute to the growth and prosperity of their communities.

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