Hundreds of petrol stations at risk from business rates (The Telegraph, 2010), Garage owner speaks out against business rate changes (Garagewire 2017), Portslade business [Hove Car Spares] suddenly closes after high business rates (The Argus, 2024).
Just three headlines that illustrate the impact of business rates on the trade.
Business rates as a method of paying for local services on non-domestic property have a surprisingly long and storied history that harks back to the Vagabonds Act 1572. But history aside, the fact remains that business rates are as unpopular as they are expensive.
A great dislike
As for why they are so disliked, Alex Izett, a partner at Daniel Watney, says that not only are they a tax on occupation, but they’re “often the third highest outgoing for most businesses after salaries and rent.”
Worse, as he explains, “business rates are calculated based on the hypothetical rental value of the property at a specific date in time, also known as the property’s Ratable Value.”
Alan Morrish, a chartered surveyor at Ameliorate Consultancy Ltd, isn’t that enamoured with business rates either.
He comments that “the rate used to calculate rate bills is far too high at circa 55p in the pound. In 1990 the rate in the pound was circa 30p. Property values have increased substantially since 1990 – meaning rates have turned into another stealth tax.”
The last rating revaluation in England & Wales came into effect from 1 April 2023 and should reflect a property’s rental value as of 1 April 2021. These values will be in effect until the next revaluation which is due to take effect from 1 April 2026.
Dealing with high rates
Now while properties are assessed by the Valuation Office Agency (VOA), part of HMRC, Izett says that ratepayers can challenge the accuracy and fairness of their assessment by registering themselves on the ‘Check Challenge Appeal’ government gateway.
As he tells, there can be several reasons for bills that are higher than they should be, and they all revolve around incorrect data held by the VOA.
This is why he says to use the Check Challenge Appeal process to examine, at the check stage – and if necessary, dispute – factual matters such as floor area, specification, age etc. – “all of which may have an impact on the value of the assessment.”
Morrish details the process further. He explains that “the first stage is about factual matters such as HMRC thinking that premises measure 1000 sqm but actually is 100 sqm.”
“The next stage,” he says, “is about matters of opinion.” By this he means, premises are assessed at £100 per sqm but should really be £50 per sqm. In this instance, he says that the onus is on the ratepayer to prove their case with evidence and detailed reasoning.
At the Challenge stage ratepayers will need to disclose the passing rent and other comparable rental evidence to support a requested reduction to the value of an assessment.
If the parties cannot agree the ratepayer can appeal to an independent tribunal of laypeople.
Morrish adds that the rateable value is the estimated rental value of a property based on values as of 1 April 2021; if physical changes are made to a property, then these will be reflected in its assessment – but only if the VOA becomes aware of them.
But if the VOA refuses to grant a reduction at the Challenge stage, a ratepayer may proceed to the Appeal stage, whereby, as Izett outlines, “both ratepayer and Valuation Officer present their respective cases to a panel of lay members to decide the correct value of the assessment.”
Another route is to see if there are any reliefs and exemptions that can be applied for – under the retail, leisure and hospitality relief scheme for example where qualifying businesses can apply for a 40% relief – it was 75% prior to April 2025 – up to a cash cap limit of £110,000 per business.
It applies to “hereditaments that are being used for the sale of goods to visiting members of the public” including shops and car/caravan showrooms, second-hand car lots, and petrol stations.
This will likely aid factors with a retail counter but does not appear to apply to garages as they are not retail businesses, but instead, are classified as industrial premises. This was a point noted by Car Dealer Magazine at the height of the pandemic when Stuart James, chief executive of the Independent Garage Association, said at the time “the IGA believes that independent garages should be included within the definition of retail premises” and so should have qualified for Covid-related business rates relief.
Beyond this Morrish advises looking at small business relief which can zero a bill, but “only if the rateable value is below £12,000 and the business occupies a single property.” Izett develops the point, noting that the relief is then tapered between £12,000 and £15,000. Regardless, by definition, this won’t be of use to anything other than a very small firm.
One final option is that if a property is empty or being re-developed there are exemptions, but these have to be applied for.
Be careful
As might be expected with anything procedural there are catches, chief of which is that the process could lead to a rate rise – something referenced by Morrish who says to “never put your head above unless you are sure.”
Further, there is always the risk of fraud where money is involved.
Consequently, Izett says that he would “advise seeking advice from a rating practitioner who is a member of one of the professional bodies – IRRV, RICS and RSA – before challenging an assessment or contacting the local authority for relief.”
Wrap up
Business rates, for the moment at least, aren’t going anywhere. Firms should therefore take time to examine their position, compare data with like premises and consider an appeal. But they should only do so on the basis of good advice as there’s as much chance of getting wrong as right.
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