Using a property for business purposes (e.g. an office, pub, shop) means it will most likely have some liabilities for a special kind of taxation - known as business rates.
Local councils charge business rates on almost all non-residential properties. Find out exactly how business rates work and whether you need to pay a rate bill.
HOW BUSINESS RATES WORK: The types of commercial buildings that are subject to the property tax include:
In most cases, using part of building premises (e.g. running a home-based business) means you may need to pay business rates.
The council that is responsible for your local area will send out an annual business rates bill. You should receive it around February or March every year (the bill applies to the following tax year).
The location of your commercial property determines how to estimate business rates in England and Wales. As a rule, you multiply the rateable value of the business by a multiplier value which is set by the government.
Most council authorities run some business rate relief schemes. The aim of the different projects is to help small businesses reduce their rates bills. Often, it is an automatic process. But, you should check to see if you need to apply.
Note: The process of business rates relief in England is different to business rates relief in Wales (i.e. Rhyddhad ardrethi busnes yng Nghymru).
Some property types get an exemption from business rates. Thus, different rules apply to exempted buildings and empty buildings relief in England. Examples include places used for the welfare of disabled people and farm buildings.
As a rule, horse stables are subject to business rates. An exception applies if you use the horses in farming. But, having stables in your garden may be liable for Council Tax.
Note: You can contact the Valuation Office Agency (VOA) to find out which particular bill you need to pay.
The council calculates business rates based on the 'rateable value' of properties. The definition of rateable value is the open market rental value estimated by the Valuation Office Agency. As a rule, VOA revaluation takes place every five (5) years in the United Kingdom.
To calculate your business rates you will need to multiply the rateable value by the correct 'multiplier'. It may be the standard multiplier or the one used for small businesses.
The multiplier is a set amount issued by central government. The rate bill gets reduced if the property qualifies for business rates relief.
You can find - and then check your business rates valuation - online. The amount will be corrected if a property's rateable value is wrong.
In some cases, the VOA will ask for rental information about the property. They use the details provided to them to work out its current and correct rateable value.
If so, you should send property lease and rent details to the VOA. It would be important to ensure its accuracy.
Note: You can also contact the Valuation Office Agency to request extra time to send in the property lease or rental information.
The Valuation Office Agency (VOA) conducts property revaluations. They adjust the rateable value of business properties during the process. The primary purpose is to reflect any major changes in the commercial property market.
Revaluation takes place on a regular basis in the United Kingdom - every five (5) years as a rule. The current VOA assessments took full effect from the 1st of April 2017 in England and Wales. They based them on rateable values taken from the 1st of April 2015.
Note: When you estimate your business rates you can check your property valuation at the same time.
It is important to point out that a change in the rateable value does not always result in a change to the rate bill. But, during the process of business property revaluation:
Note: The Valuation Office Agency needs to determine accurate valuations during revaluation. That means they may ask you to supply them with up-to-date rental evidence.
Being eligible for business rates relief usually results in a discount of some sorts. Local council authorities can provide several different concessions including:
Many of the council authorities offer different concessions for small businesses. Check with your local council to see if you qualify for one of the business rates relief schemes. Get in touch with the Valuation Office Agency for help with property rateable value.
Note: You should contact your local council to query a business rates bill (e.g. to pay in instalments). They also deal with business rate relief and bill payments.
In some cases, you may need professional advice and help from a qualified rating surveyor. As a rule, they will charge for giving out advice, but organisations offering this service include:
RICS Enquiry Line
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Email: [email protected]
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There are several reasons why business rates could change, such as if you:
You must report any changes to correct your business rates using the Valuation Office Agency service (in England or Wales). This ensures you pay the correct amount and avoid getting a backdated rates bill.
You can also ask for a temporary reduction in the business rates to the VOA. Typical 'severe' disruptions that can reduce a rate bill could be building work, flooding, or roadworks.
As a rule, working at home (or running a home-based business) will not be subject to business rates, providing:
In some cases, besides paying Council Tax you may also need to pay business rates if:
Note: The Valuation Office Agency can confirm whether you should be paying business rates or not. The local assessor provides the same service in Scotland.
The VOA calculates rateable value based on 'fair maintainable trade' in England and Wales. It relates to the annual level of trade (excluding VAT) that they expect a pub to achieve. That expectation assumes the pub operates in a 'reasonably' efficient manner.
Even so, there are some variables to 'fair maintainable trade' based on:
The VOA will also consider any rental payments and pub turnover. They use these figures to apply a percentage when working out the pub's rateable value.
Note: The VOA pub guide shows how they agree the percentages with the British Beer and Pub Association. Read more in the 'Guidance the Valuation Office Agency takes for public houses'.
You can contact the VOA to check their figures or disagree with the actual figures used. They will need details of the pub turnover (excluding VAT) for all sources (food, gaming, and liquor).
Valuation Office Agency (VOA)
Telephone (England): 03000 501 501
Telephone (Wales): 03000 505 505
The local assessor works out the rateable value in Scotland. You should contact them to check their figures or to disagree with the figures used.
Property in England gets rated as a self-catering property and gets valued for business rates if it is available for let at least 140 days of the year.
Property in Wales get rated as a self-catering property and valued for business rates if (both):
The VOA calculates the business rate based on the type of property, its size, the location, and how many people can sleep inside it. The term that describes how many people can sleep in the property is 'single bed space'.
Note: The rules on business rates for self-catering and guest house accommodation differ in Scotland.
Business Rates Explained for Small Businesses in United Kingdom