Understanding Business Rates in the UK
Business rates, one of the oldest taxes in the UK, date back to the Poor Law of 1601. These rates are essentially taxes paid for the occupation of non-domestic properties, amounting to approximately 50% of the annual rent. The value of these rates is determined by the “rateable value” of the property, which is assessed for all commercial properties on a specific date.
Administered and collected by local authorities, business rates are a way for those occupying commercial properties to contribute towards the cost of local authority services. However, they are also a contentious tax, representing a significant overhead for businesses.
Authority and Calculation of Business Rates
The setting of non-domestic rates is the responsibility of central government, specifically the Valuation Office Agency, an agency of Her Majesty’s Revenue and Customs (HMRC). The VOA calculates business rates based on the rateable value (RV) of a property, representing the yearly rent the property could be let for on the open market on a specific date.
It is important to note that business rates are handled differently in Scotland and Northern Ireland.
Operation and Appeal Process
Business rates can be estimated using a multiplier set by the VOA, currently around 50p to the pound. The multiplier applies to larger businesses with an RV of £51,000 and above, as well as empty premises with an RV of £2,900.
The VOA introduced a new appeals scheme in 2017 called Check, Challenge, Appeal (CCA), requiring ratepayers to confirm facts about their property before challenging or appealing. The three stages of this process involve checking, challenging, and appealing the valuation.
Understanding the intricacies of business rates and the appeal process can be complex, and seeking expert advice, like that provided by Colliers, can be beneficial.
Responsibility for Payment
Non-domestic rates are paid by the occupier of a property, whether that be the landlord or the tenant. In cases where the landlord charges rent inclusive of business rates, the responsibility for payment can vary. However, the bill remains in the name of the occupier, and action can be taken against them if it goes unpaid.
Properties that are empty still require rates to be paid, with the bill falling to the landlord after a three-month period. Some properties may qualify for extended empty property relief.
Calculating Business Rates and Relief
The rateable value of a property is used by councils to calculate the rates bill, which may not reflect the actual rent payable. Ratepayers may be eligible for rate relief, either permanent or temporary, based on their circumstances.
In response to Covid-19, retail, leisure, and hospitality businesses were granted 75% rate relief up to a cash cap value of £110,000 per business, extending into the 2024/25 tax year.
Registering for Business Rates
To register for business rates, businesses can contact rating surveyors to inform the local council of their occupation. It is also possible to check business rates on the VOA website and compare properties for reference. Seeking advice from qualified representatives is recommended due to the technical and legal complexities of business rates.
Sophie Attwood, Director of Rating at Colliers and head of rating in the Liverpool office, can provide expert guidance on business rates.
Conclusion
Understanding and navigating business rates in the UK can be daunting. Seeking professional advice and guidance can help ensure compliance and potentially reduce the financial burden of these taxes.
Further Reading
For more information on business rates and related topics, consider reading “Do I need to pay business rates working from home?”