The origin of business rates in England goes back many hundreds of years. These historic taxes on the use of non-domestic property were first formalised with the Poor Law way back 1572. In more recent times, the Local Government Finance Act 1988 established business rates in England, Scotland and Wales. With Business Rate Relief (BRR) for small businesses introduced in 2005, with the intention of reducing the rates burden on small businesses, this opens up the possibility of reductions for eligible companies.
Do all small businesses pay business rates?
The full business rates act is complex and detailed, so it is always best to ask your local council for advice on your circumstances. Business rates are calculated on the property ‘rateable value’. As an example, for hospitality-related businesses, there are multiple criteria:
B&B establishments will be required to pay business rates if:
o they offer short-stay accommodation to MORE than six people simultaneously at any given time,
o the owner occupies part of the property as their main home, but the part that they occupy is NOT a material part of the house.
If the property usage of the business by guests calculates out to be more than 50% of the property, then your property might be qualified for rates regardless of the number of guests.
o the letting of rooms is NOT a subsidiary to the use of the house as your home. This links to the previous point, whereby the main activity of the property must be home to the owner in order to NOT qualify for rates.
o the scale of modifications were profound in order to accommodate guests
Self-catering establishments pay business rates unless the short-term lets are for less than 140 days/year and that is also the total available days per year
o if you have rooms available 200 days per year but only fill them for 140 days/year, you still pay business rates as the availability was there for more than 140 days.
When rates are deemed to be due, remember that only the portion of property utilised for business activities is rateable. The balance of the property used for home purposes will pay council tax.
Visitor attractions pay business rates but approved, and registered charity operated businesses or destinations pay 80% less rates.
You won’t have to pay business rates or the full business rates if you qualify for Small Business Rate Relief based on the parameters set out below.
Important Note: There is government consultation on self-catering and holiday lets being rateable for business rates vs council tax as owners of holiday homes are fraudulently avoiding council tax.
How do you qualify for small business rate relief?
Your business might qualify for Small Business Rate Relief for 12 months if your property (or the business portion of the property) was valued by the council as less than £15, 000.
To be more specific, properties with a rateable value of up to £12, 000 receive 100% relief, and it is on a sliding scale up to £15, 000, the latter receiving 0% relief.
This only applies to the main property.
You might still qualify for Small Business Rate relief after this if both of the following apply:
none of your properties has a rateable value above £2, 899
the total rateable value of all your properties is less than £20, 000 (£28, 000 in London).
In the instance that the total rateable value is between £15, 000 and £51, 000, the small business multiplier will be used (it’s lower than the standard multiplier).
The increase in business rates published, due to the 1 April 2017 revaluation, has a set limit of the percentage(transitional relief) by which your rates bill increases annually until 2022. This is automatically applied to your bill.
Can I claim small business rate relief if I work from home?
As a home-based business, business rates might be due on the part of the property serving the business. This is not cast in stone. Council opinions vary on whether it is due if use is of a completely separate part of the property vs. areas that also serve domestic needs.
This will need to be clarified with your local council as each council to ensure you are not overpaying or underpaying.
If your business and property meet the criteria set out in the Small Business Rate Relief in the section above, then you might qualify for small business rate relief.
Lodging a business rates appeal as a small business
If you have observed what you feel is an incorrect evaluation in the 2017 valuation of your property (until April 1, 2022), you can appeal to your local council. It is obviously advisable that you appeal sooner rather than later. The billed business rates will still be due in full until a decision has been reached. It is important to note that there are limits on how far any rates change will be backdated.
You can lodge an appeal in the form of a ‘proposal’ to the local council’s Valuation Officer. You can also lodge it online through the VOA website.
A three month period is given for resolution before it’s automatically lodged with the local Valuation Tribunal. They will hear the case and decide.
Seeking the advice of commercial valuers
If your evaluation dispute with the local Valuation Officer is unsatisfactory, you can use private valuers/rating consultants before lodging appeals.
Before signing them on, always assess their terms of the contract, obtain references from at least five other clients, including a description of the dispute and ask for written confirmation of their professional indemnity insurance cover.
If there are multiple appeals from a specific area, the valuer might on behalf of all of them, thereby reducing the per-case cost.
Be warned: there are frauds out there prying on desperate small businesses. The valuers are ‘unqualified’ firms seeking a fixed fee before work is completed or even started and comes with a ‘guaranteed’ successful outcome. Contact is initiated by cold calls telephonically or in person. It is advisable to avoid them. Appeals have a guaranteed unknown outcome even when using a highly successful valuer.
Reputable firms are Members of the Royal Institution of Chartered Surveyors (RICS) and the Institute of Revenues Rating and Valuation (IRRV). Such firms are strictly regulated under narrow parameters to protect the public from misconduct and are best used to value properties and assess small business rate relief. All of these member companies are also required to hold and regularly prove adequate indemnity insurance.