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How are business rates calculated?

Written by: Craig Newton on Friday 19/02/2016

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Business rates are paid to your local authority on commercial properties such as offices, warehouses, factories, shops and pubs – they, are in effect, a commercial council tax and go towards funding local amenities such as the police and fire services. The proceeds from business rates are split 50/50 with central and local government with some of the money coming back to communities in the form of grants to local authorities. We take a look at how your business rates are calculated.

Background

If you’re starting up in business it’s important to know how much rates you’ll be paying on a property before you agree to the lease. If you’re an established business, keeping track of the right amount will help with cash flow forecasts.

Business rates are paid by the occupier of the premises – either the property owner or the leaseholder – and it’s vital that both you and your local authority know who is responsible for the payment. If you rent a property, check the lease to find out who pays the bill. Some leases include business rates in the rent – in this case, the landlord must ensure that the bill is paid. It’s your responsibility to notify the local authority of any changes, such as a move into new premises or if you’re starting a new business – this is important so that you pay the correct amount.

Calculating the rate

The amount of business rates you’ll pay is set by the Valuation Office Agency and there are some simple calculations you can do to find out if you’re paying too much or too little. The rateable value is based on the property’s estimated annual market rent. These amounts undergo a review every five years and take into account how large the property is and what it’s being used for. If a building has multiple uses, each part will have a different value.

All properties have a ‘rateable value’ – to discover what yours is, visit this site and simply enter your postcode: http://www.2010.voa.gov.uk/rli/en/basic/find

Once you’ve found out how much the rateable value is, you need to multiply that with the ‘multiplier’ or ‘poundage’, which is set by the government. The multipliers can be found here: http://www.2010.voa.gov.uk/rli/static/HelpPages/English/faqs/faq146-what_are_the_current_multipliers.html

This poundage simply means the amount of pence in the pound you’ll pay, before any relief or discount. The poundage is reviewed each year in line with inflation. To arrive at the correct figure, simply multiply the rateable value by the correct poundage.

Exemptions

Some premises are exempt from business rates. These include buildings which are used for the training or welfare of people with disabilities, farm buildings and land, places of public religious worship and fish farms. If you own a commercial property that is standing empty, you can claim exemption for the first three months of the period of vacancy (for owners of warehouses, this time period is six months). After that, you will be liable to pay the full amount.

Payment and relief

You will usually receive your business rates bill in April or March. Most councils will ask for monthly instalments. If you miss an instalment, you will receive a reminder and have seven days in which to pay. If you do not pay after the reminder, you may be asked to pay the full year’s outstanding amount.

If you think the amount on the bill is incorrect, contact the council immediately. Similarly, get in touch with the appropriate department if you are struggling to pay the bill – most local authorities will be lenient if you explain your circumstances and offer to pay something when you can.

On premises whose rateable value is less than £15,000, you may be able to apply to your local authority for small business relief rate (SBRR). The amounts will vary depending on the value of your business rates.

There may also be the opportunity to apply for a temporary reduction in business rates if your premises have been affected by severe disruption, for example, local road works, flooding or construction in the area.

While the matter of calculating your business rates may seem a simple one, the procedure can be onerous, especially if you’re appealing against the amount or applying for relief. For professional advice and assistance in matters relating to business rates, contact our team of experts.

The rateable value is based on the property’s estimated annual market rent. These amounts undergo a review every five years and take into account how large the property is and what it’s being used for. If a building has multiple uses, each part will have

Written by: Craig Newton on Friday 19/02/2016

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