Business rates can be an end to many small businesses due to them being one of their largest overheads. If a business has a premise valued at over £12,000, that business will have to pay business rates. With the constant worry that they will rise next valuation, there is no safety line for small businesses to limit the rise so that they can still make a profit.
The high streets have been struggling with online retail in recent years, and with costs of maintaining a non-domestic property such as a shop or office or pub rising, it is causing a serious effect on local economies due to many businesses throwing in the flag because they can’t make enough money to be able to make a reasonable profit margin with all the expenses added.
Valuation rises cause devastating effects for some, but are there any solutions in which these businesses may be able to minimise their bill or even appeal their rates? In this article we will do just that, we will discuss business rates in more detail and explore avenues in which we can help to reduce and appeal to business rates for small businesses.
What Are Business Rates?
Business rates are a yearly tax on a property used for business purposes. Properties include warehouses, bars, shops and offices all tie under non-domestic use so there are not many non-domestic properties out there which can be immune from business rates. Business rates are loosely based on how much rent could be charged on the premises.
These rates can also be charged where only part of a building is being used for non-domestic purposes. Business rates can be easily managed if it has been factored into its financial forecast. It is always best practice to be well prepared and have a good accountant for the business as this will help later down the line if the business needs to appeal its rates.
A business can get a headache when the property gets revalued and the rates rise. A rise in business rates can cripple a business due to the rates more than doubling and sometimes quadrupling if the premises has had a big renovation.
How Are Business Rates Calculated?
Every non-domestic premises is given a rateable value which is then multiplied by the “multiplier” which is set by the Valuation Office Agency. In the 2024/21 tax year, for premises valued below £51,000, the multiplier is 49.9% but for larger valued properties it is now 51.2%. These business rates apply to all businesses no matter if the business owns the property or rents it, a business can check if the rateable value by looking at the government website.
Business Rates With COVID-19
Covid-19 has caused an enormous amount of disruption to businesses and many large businesses such as Arcadia Group’s stores like Topman, Debenhams and much more have closed their doors for good. With people on lockdown and the high streets not being able to open their doors, it has been extremely hard for businesses to make any money at all.
The government has introduced a business rates holiday for businesses in the retail, leisure and hospitality sector. Other businesses such as nurseries have also been given this holiday for the 2024/21 tax year. Once this is over, the government are going to re-evaluate the whole business rates system which will be available to see in autumn.
What is the Small Business Rate relief?
There is a range of reliefs available for properties, but the small business rate relief is the most useful. This is available If a business is struggling to pay its business rates. For a business to be eligible for this relief, they must either occupy a property with a rateable value of £15,00 or less or occupy one property, plus other properties that have a rateable value of £2900 or less.
Full relief is available on properties with a rateable value of £12,000 or less and for those who are valued between £12,001 and £15,000, relief will gradually reduce from 100% to zero per cent.
What if I think my rates are wrong?
Many business rates payers believe that their rateable value is wrong due to the amount they have to pay. If the rateable value is wrong that means the business rates could be too.
To check whether the business rates are correct it is best to check the Valuation Office Agency rateable value for the property. Compare with other similar properties in the are too. If it is suspected that the value is wrong then the business can apply to have it changed with The Government Website
What Can Change Business Rates?
The Valuation Office Agency revalues business properties every 3 years due to the property market ever-changing. With information from previous years, the next will be in April 2024 and will be based on rental values in April 2024. Valuations can rise which means that the rates will also rise. However, the good news is that they can also go down meaning that the rates will also reduce.
If the property has been through big changes such as a refurbishment, an extension, subletting the property and also the change of business can all affect the business rates. If this happens, it must be reported as it may be backdated if caught.
How Can I Reduce My Business Rates?
There are several ways in which a business can reduce the business rates, there are even some instances where a business may be able to eradicate business rates altogether. If the premises’ rateable value is below £15,000 and is the only premises, it will qualify for a small business exemption. A property that is valued at £12,000 or less won’t have to pay the rates at all due to them being exempt. If the property is valued at £12,00 upwards, there is a sliding scale from 0%-100% until the business pays the full business rates at properties valued at £15,000 or over.
There is a range of different business rate reliefs available. If the business is in retail or some hospitality industries such as a restaurant, a shop or a cafe, then the rates can reduce by a third with a retail discount.
If the business rates have risen through revaluation, then there is a way on which a business can apply for transitional relief, this helps small businesses transition to the new rates. If the business has had a rise and it feels it should have this, the chances are that it already does due to this automatically being applied to a business. This doesn’t mean that the VOA is always right so its best just to check anyway.
If a business is situated in an enterprise zone, it can get reduced or have zero rates. An enterprise zone is a small area in the UK that has been set up to encourage investment or development. These zones are a strategy from the government to support entrepreneurs or expanding businesses.
Business rates are tax-deductible business expenses so they can be deducted from the profits before calculating tax.
Can I Appeal Against My Business Rates?
If a business premise has undergone a revaluation and sends the bill sky high, it is very possible that the valuation office has over-valued the property. This means that an appeal is possible due to them making a mistake. For business rates appeals to take place, a business must go to the Valuation Tribunal Service. It helps a business case if there is some evidence to support the case that the property is incorrectly valued. Examples of this include:
- Proof of similar premises in the area that is valued lower
- Premises that are valued the same but are much bigger or have a better location.
- Business accounts, If the accounts don’t show a substantial turnover rise that can’t be explained by other areas of the business.
- Refurbishment Details: If the business has undergone a refurbishment and the rateable value has unreasonable skyrocketed, then this can also be appealed if the business has evidence to justify their appeal.
Who Can Help Me During The Business Rate Appeal Process?
If a business has done its research and believes that its business rates are too high, then two types of specialists can provide invaluable help to the cause. The first specialist is a rating surveyor, they can assess the true value of the property based on evidence on local rental agreements. This will provide a better view of the situation and will help to find out whether the business has the grounds to appeal.
It can be difficult to obtain all the correct documentation when appealing business rates so it is best for the businesses accountant to help out. They can help to construct a portfolio of all the necessary evidence to support the appeal that the rateable value of the business premises is too high.
I am a freelance writer specialising in business, sustainability and fashion. I believe that with current times we are in need of a drastic change to make business more sustainable.