Business rates FAQ’s
Below are some of the most frequently asked questions on the specific topic of Business Rates.
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If you have any other questions please do not hesitate to email us at info@cvsuk.com or alternatively call us on 0161 291 0330 and speak to one of our friendly support agents.
Business Rates are a tax (much like council tax) on the owners or occupiers of non domestic commercial property. Rates are typically calculated on a ‘rental value’ of the property usually around 43-45% of annual rent, making it one of the largest overheads any business has other than rent. This obviously substantially impacts on the profitability of many organisations.
You will receive a rate demand from the appropriate billing authority around the 1st April each year. Normally you will pay in ten equal monthly instalments.
Business rates are usually paid by the occupier of the property however; sometimes as a tenant your rates may be included in the lease. This means that you still pay business rates however the landlord takes responsibility for the payments. Where the property is empty, it is the person entitled to possession of the property who is liable. Depending on the circumstances, this could be the freeholder, the leaseholder or some other person.
The Valuation Office Agency (VO) of HMRC assesses the rateable value of all relevant properties in England and Wales.
Once in every five years the Valuation Office publishes a new rating list for each billing authority across the country, which shows the rateable values of all properties in its area. It includes the address and description of each property as well as the date from which any alteration to the rating assessment takes effect. This information is published on the VO website as it is a public document.
There are two main factors: the rateable value of the property and the level of the uniform business rate (UBR), which is expressed as a fraction of a pound. Multiply the one by the other and in theory you would have the annual amount of business rates. For more details please see our business rates calculator which will also advise on how much potential savings CVS could assist you with.
The UBR is the multiplier that is applied to the rateable value to calculate the rates due. Each year, except in the year of a rating revaluation, the UBR increases in line with inflation. For the rating year 2009/10, which runs from 1 April to 31 March, the UBR is £0.485 in England. An example of how this is calculated is shown below:
If you occupy premises in England with a 2005 rateable value of £40,000, you calculate your theoretical business rates liability as follows:
£40,000 x £0.485 = rates payable of £19,400.
But this is not necessarily the end of the story. Rates bills can simply be incorrect or at times illegal therefore you should always check you are paying the correct amount. For 2009/10, the Government has introduced a rates deferral scheme, which enables ratepayers to apply to defer 60% of the increase from 2008/09 to 2009/10 which becomes payable in 2010/11 and 2011/12.
The rateable value of a property is roughly its open market rental value - assuming the rental value (even if you own the property the rate is based on the assumed rent). There is a fixed date at which the rental value is assessed which is two years before each rating list comes into force. The most recent revaluation was effective from 1st April 2005. It follows, therefore, that rental values are taken at market conditions prevailing at 1st April 2003.
Rating valuations take place countrywide every five years. The rateable value will also change if the ratepayer lodges a successful appeal or if its value is affected between revaluations due to physical changes to the property or its locality.
The next general rating revaluation will be in 2010 – for more information on how this could affect your business and how CVS can help you prepare for the revaluation and minimize your rates bills, see our report on the impact of the 2010 rating revaluation.
http://www.cvsuk.com/services/business-rates/2010-rating-appeals/
Most business premises are assessed for rates and have a rateable value. Living accommodation is generally treated as domestic property and is subject to the council tax instead. Apart from living accommodation, there are several types of property that are exempt from business rates, including agricultural land and buildings, fish farms and most churches.
In some cases, business premises and living accommodation are in the same property and occupied by the same person. In these cases the property is known as a "composite". Typical examples of composite properties are a shop with living accommodation or a factory with a caretaker's house or flat. In these cases, special rules apply.
Generally the answer is yes, however there are some concessions. In England and Wales there is no liability for rates for the first three months a property is vacant, or for the first six months for industrial and warehouse property. After that, rates are payable at the full occupied rate.
Empty rates are not payable on vacant storage land, listed buildings, premises in England and Wales with a rateable value below £15,000 (previously £2500) and empty properties of companies in administration or liquidation.
The billing authority has discretionary powers to grant relief where a property is temporarily only partly occupied. If relief is granted, the rateable value will be apportioned by the valuation officer and full rates will be payable on the part that is occupied and empty rates will apply to the unoccupied parts of the property.
The rules governing the transitional arrangements are complex but broadly, transition was introduced to phase in some of the largest changes in business rates arising from revaluation. As the rules are so complex it is not sensible to go into too much detail as these can only be dealt with on a case by case basis. If you require more information please contact us.
A Business Improvement District (BID) is a partnership between a local authority and the local business community to develop projects and services that will benefit the business environment within the boundary of a clearly defined commercial area. There are over 75 BIDs currently, with a cost implication for all property occupiers in a BID area. BID levies are normally based upon a property’s rateable value and many are charged at between 1% and 2% of the assessment.
City Supplements is a levy on the Business Rate in order to fund particular local projects that contribute to the economic development or regeneration of their area. These are called BID Schemes(Business Improvement Districts) which if successful run for five years, there are over 60 BID’s already established in the UK with more planned in the future. For example additional terrorism cover, funding of the Olympics 2012.
CVS can advise clients on the financial impact of existing BID’s or proposed schemes.
The purpose of this Bill is to give upper tier local authorities (county councils, unitary authorities and, in London, the Greater London Authority) the power to levy a local supplement on the business rate and retain the proceeds for economic development. An example of this is the CrossRail Business Rate Supplement which will be introduced in 2010.
The main elements of the Bill are:
- Creating a new power for upper tier local authorities to levy a local supplement on the business rate and to retain the proceeds for investment in that area.
- Providing safeguards for business, including: a requirement that proceeds should be spent on economic development; consultation and, in certain circumstances, a ballot of businesses that would be affected; a national upper limit to the levy of 2p per £1 of rateable value; an exemption for all properties with a rateable value of £50,000 or less.
- Flexibility for authorities to: decide the duration of the supplement; reduce liability for the supplement for properties above the £50,000 threshold; and to decide whether to offset Business Improvement Districts levies against liability for the supplement.
Charities and Community Amateur Sports Clubs receive 80% mandatory relief. Non-profit-making organisations may apply to the billing authority for discretionary relief (up to 100%). This application must usually be renewed each year.
As of the 1st April 2005 small businesses could apply for Small Business Rates relief as long as the aggregate RV’s of their main and any ancillary properties are below £15,000 (below £21,500 in London). Relief is available at 50% for assessments less than £5,000 and the amount of relief reduces on a sliding scale to nil at RV £10,000. For further information please contact or Business Rates team contact us.