The origins of business rates can be traced back to the Poor Law in 1601, and, as a result, are one of the UK’s oldest taxes.
Essentially, business rates can be loosely translated as the payable tax for the employment of non-domestic property – roughly corresponding to 50% of the property’s rent annually.
The term rateable value determines the specific value on which the business rates are applied – with all commercial properties being assessed on a single day. Read how business rates are calculated.
In the article, we will explore everything you need to know about business rates when starting a small business.
Why Do We Need Business Rates?
Business rates or non-domestic rates are set in place to ensure that those who own commercial (non-domestic) properties are contributing to the maintenance of local authority services.
In April 2013, a business rate retention arrangement was introduced that outlined that a proportion of business rates had to be paid locally. Although business taxes can sometimes be seen as controversial due to representing one of the largest overheads for businesses.
Who Sets Non-Domestic Rates?
Business rates are produced by the central government, or more precisely the Valuation Office which is an authority of HMRC (Her Majesty’s Revenue and Customs) – find out more on the HMRC help page.
Based on rateable value (RV) your business rate is calculated by the VOA. The VOA maintains and compiles a comprehensive list of all rateable values. On the front of your bill, you’ll find the rateable value of your property.
Broadly, the rateable value indicates the potential property’s yearly rent if it had been let on the open market on a specific date which is issued in legislation.
If circumstances change, then the Valuation Office Agency can modify the value to correspond with this.
The ratepayer (as well as others who are interested in the property) is able to check and challenge the displayed valuation if they believe it to be incorrect.
How Do Business Rates Work?
Understanding how non-domestic rates work will help to ensure that your rateable value is correct.
You can estimate your business rates by using the multiplier established by the VOA.
Currently, the multiplier is set to approximately 50p to the pound.
As Of 2020/21
The large multiplier is relevant for larger businesses with a £51,000 and over RV, all properties that are empty stand at an RV of £2,900.
The current 2021/22 multiplier is frozen to accommodate drastic changes in the market.
Understanding the new appeals scheme in the rating system is important.
Launched in 2017 by the VOA, it is known as the Check, Challenge, Appeal (CCA).
This scheme places responsibility onto the ratepayer to evaluate their assessment prior to appealing or challenges.
The three stages consist of:
Check
During this stage, the property’s factual matters should be carefully reviewed and confirmed.
Once this has been submitted, the VOA has 12 months to examine it and respond.
Challenge
If confirmed, within 4 months of the Check decision, a thorough document consisting of an assessment alongside a valuation should be submitted to the VOA in order to change the RV.
You cannot submit more than one challenge against the same valuation.
Then, a decision notice will be issued by the VOA on the Challenge submission. After this, the matter should be finalised.
Although, if the VOA were to disagree with your Challenge, you have the right to appeal.
Appeal
Within four months of the challenge decision, your appeal will be taken for an independent review at the Valuation Tribunal.
If it reaches the appeal stage, then the appellants can put forward their case in front of a panel that will cross-examine the claim.
After the proceedings, in 28 days a decision will be issued.
Who Pays Non-Domestic Rates – Landlords Or Tenants?
All non-domestic rates are undertaken by the premises’ occupier. This is typically the tenant or the landlord.
In some instances, the property’s landlord will charge a tenant rent that includes the business rate.
This decision can be made between both parties. Although, having said that, this bill is named under the occupier.
If this isn’t paid, then action will be made in due course to the occupier.
Even properties that remain empty need to pay business rates.
If there are no tenants, then the bill falls onto the responsibility of the landlord after three months – usually consisting of a full bill.
Although, in certain situations, some opt for extended empty property relief.
How Much Are Business Rates?
The rateable value indicates the value a property could have been let for on a day determined in law.
While it may not be the exact date, the law makes the assumption based on the property’s condition.
This doesn’t determine the amount you have to pay, but it is utilised by councils in calculating your rates bill.
How To Register For Business Rates?
The best way to register for business rates is by contacting a reputable rating surveyor.
Here, they will contact the local council to notify them regarding your occupation, whether or not the site is new, and what needs to be assessed.
Another way is to use the VOA website to check your business rates.
You can compare your property to a similar market, size, and locality.
Although, business rates can get extremely confusing and technical will have lots of rules and legal statute to consider.
Therefore, when appealing, it’s best to get in contact with a qualified representative to help you through the process.
Final Thoughts
Business rates can become a very confusing matter, especially for small businesses starting out.
With this in mind, we have created a detailed guide to inform you of everything you need to know about business rates.
From what they are, how they are calculated, and how to register for business rates, hopefully, this guide will provide you with the necessary information.
