Understanding UK Business Rates: A Guide

by Commercial Blawg on February 14, 2019

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Business rates are charged on most commercial or non-domestic properties such as shops, offices, factories, pubs and even holiday home rentals. Just as you pay council tax on your home, businesses must also pay rates for their premises. Most businesses will be required to pay bills in ten equal payments throughout the year, just like council tax. If a business defaults on a payment then they may be forced to pay the outstanding bill upfront or face court action.

Unfortunately, business rates can be a minefield for many companies who struggle to come to terms with what exactly they qualify for – particularly since the controversial 2017 evaluation.

To help you better understand what business rates you might have to pay, see below our handy guide:

The Business Rates Valuation Process

Each council has its own valuation process, meaning that business rates can greatly fluctuate depending on where the premises is in the country. In every case, there is a valuation officer who is tasked with working out the ‘rateable value’ of the building. This is essentially their view of what the property’s annual rent would be if it were vacant and on the market.

These rateable values are based on a previous valuation of the market rent, which must be re-valued every five years. The council will then multiply the rateable value by the Uniform Business Rate, set by the chancellor of the exchequer. There is a limit, however. The rate cannot rise by more than the rate of inflation.

If You’re Working From Home

If you work from home, you’ll need to pay business rates on the part of the house that you use work for, and normal council tax on the rest of the house. Whether you get charged can greatly depend on your local council, what kind of work you do and how much commercial work is done in the home.

For example, if your “office” is less of a home office and more a laptop on your lap in the living room, then you won’t be charged business rates. On the other hand, if you do have a converted outbuilding as a home office or spare room that’s now being used for work, you may be required to pay business rates.

One of the biggest complications with business rates is that each scenario is different, and it’s largely down to the valuation officer to make a final decision on whether you should be charged these rates. They’ll take into consideration how often the room is used for business, to what extent the workplace dominates the room, and any extensions on the home specifically made for the business.

What Is The Small Business Rates Relief?

There are a range of reliefs available for certain properties. In some cases for small businesses, you may be able to get business rates relief from your local council to reduce your bill. This is often automatic, but you may need to apply depending on your area.

Currently, a relief is available if your property has a rateable value of less than £15,000, but also if your business only uses one property. Full relief is available on properties with a rateable value of less than £12,000. Those between £12,001 and £15,000 will experience the relief amount gradually reducing from 100% to 0%.

For example, if the rateable value of your business is £13,500 you will receive 50% off your bill. If your rateable value is £14,000, you will receive 33% off. However, if your property no longer qualifies as a result of the 2017 revaluation, there are caps on the amount you will pay.

If You Think Your Rates Are Wrong…

There some instances where you may think your business rates are wrong. If you suspect you’re paying more or less than you should be, then your business rates will have been calculated incorrectly. You should refer to the valuation officer’s rateable value for your property and check whether there are any discrepancies.

You can also compare it with similar properties in your area. If either of these options still lead you to believe you’re paying the incorrect rate, then you can apply to have it checked and changed here. You can also consult one of the commercial litigation solicitors Manchester offers if you believe you’re owed money from overpaying in previous months.

Helpful Resources

There are some other business rates available, including sports club and charitable rates, for more information take a look at the government’s official website. There are some businesses located in rural areas such as petrol stations and shops that may be eligible for relief.

If you’d like to estimate how much your business rates bill may come to, you can use the calculator tool available here. This is helpful if you are thinking about buying a property, but want to make sure that you’ll be able to afford the upkeep in the future.

Commercial Blawg

Commercial Blawg

Business law blogger at CommercialBlawg
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Commercial Blawg
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