Tax & admin 11 March 2016

Business rates: What you need to know as a small business owner

It’s easy to forget about business rates. Startups should remain in communication with councils

Writing for Business Advice, business rate debt and dispute specialist Mark Allen looks closely at how owners of small firms can better manage their business rate responsibilities.

As another financial year draws to a close council business rates departments across the UK will be starting annual cycles of sending out rates bills. If your micro business is a recipient of such a bill and is not in agreement with it, or struggles to pay it, then you may have an interest in gaining further understanding of this subject and why it matters.

Business rates can often be overlooked, especially when starting a business, and you will probably need to communicate regularly with your local council initially to establish the basics and ensure information and dates held by the council are correct. Communication via the council’s email system is often more convenient for everyone and this offers a record of details exchanged, in case there is any confusion when the bill is issued.

There can be historical aspects relating to the outstanding business rates of previous renters. The previous renter who’s now moved on may not have kept the council informed, leading to confusion. This is not the landlord’s responsibility. The landlord is only responsible for dates the premises have been empty or used by them. The person whose name is on the lease is ultimately responsible for any business rates due on the premises occupied by the business, unless the business is a limited company.

You may need all communication and lease documentation for dates in order to ensure the rates bill is correct and reflects the business premises and its uses. The amount due should be the amount expected as it is based on relevant and accurate information supplied to the council via the business concerned.

Each council tends to have differing response times to emails, so patience may be required on occasion. If the year passes and data on the business held by the council is wrong once the bill is issued, things can become more complicated. It is often the case that different councils have different payment plans available, some may offer three-month plans, others a ten-month plan and some may offer no plan at all.

If no plan is offered by the council and no payment made on behalf of the business, then often the council may employ a private bailiff to recover the money. At this point, the council may decide not to acknowledge or communicate with the business concerned and refer them to the chosen bailiff.

The payment plan is an agreement between the business and the council, if broken then the council may again direct a bailiff company to recover the debt. There are rules, regulations and guidelines to ensure the bailiff company working on the council’s behalf operates reasonably and professionally. Many bailiffs offer their own payment plans to help with payment, but there will often be associated costs once a bailiff is involved.

Payment plans can help reduce the pressure on cash flow and help the company weather a short downturn. They are a lifeline at times to ensuring a business keeps trading especially in the first few years. It is in the council’s interest to keep as many businesses as possible operating as the benefits of a busy high street are obvious.

There are rate relief’s available and reduced rates for storage and other uses which all businesses should be aware of and make use of. Sub-letting unused parts of a building helps reduce overall costs, however this can introduce extra administration costs and responsibilities. Some businesses where possible have split into smaller companies to acquire rates relief, but this could multiply administration costs.

Ten Steps to help manage your business rates.

(1) Communicate with the council via email
(2) Ensure dates and facts held by the council about your business premises are up to date and correct
(3) If renting new premises, ensure you are not charged for someone else’s business rates
(4) Know whether it’s a private company or limited company that is responsible for the business rates debt
(5) Keep lease documents and all other documents related business rates
(6) Enquire about council polices relating to response times and payment plans
(7) Obtain a payment plan before bailiffs are involved
(8) Ask your council about rate reliefs available and reduced rates for storage
(9) Investigate sub-letting as an option
(10) Can the business be split into smaller entities to qualify for rates relief?

With business rates, it’s about getting ahead of the game and ensuring a bill issued is for the correct amount and issued to the correct person. The responsibility falls on the business owner who has signed the lease to check what the council’s specific policies are and how it may affect them in the future.

All councils have to finance services and have obligations to the local community. They, like all institutions, will try to recover outstanding money owed to them. It pays to keep a cool head and remain professional and patient when dealing with councils or bailiffs. If you reason with either party, they can and will often help in assisting and relieving the situation.

Mark Allen – Meng, PGCE. Operations

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