Louise Hebborn gives you an insight into the rules around business rates. If you know the ins and outs of it, you might be able to save some money.
Business rates, along with rent and employees, form a large part of the fixed costs that businesses and organisations have to pay irrespective of what they earn. While many at the top believe that a rates demand, once received, must be paid in full and without question, there are others who know that the system does have a little leeway built into it.
Business rates are a tax on property and all business premises are given a rateable value by the Valuation Office Agency (VOA) in England and Wales.
The basic rateable value usually remains fixed for a five-year period. The rateable values that became effective on April 1, 2010 were based on open market rental values on April 1, 2008. The next revaluation comes into force on April 1, 2015.
The amount of business rates payable is calculated using the rateable value and a multiplier set by the government. This multiplier usually changes each year in line with inflation. Currently, the standard multiplier in England is 42.6p. There are reductions for businesses eligible for Small Business Rate Relief (SBRR), while businesses in the City of London should expect to pay a small surcharge on top of the standard multiplier.
Despite calls for rates to be frozen during such tough economic times, the government implemented an increase in April 2012 of 5.6 percent.
Challenge a valuation
Business rates can often be challenged through an official appeal process, however. There are three grounds to appeal:
– The new valuation was wrong
– The property has been changed and should be reflected in the rateable value; or
– An alteration made to the valuation is wrong
There are various ways to challenge a rating and businesses should seek advice from a professional advisor including a solicitor, the Royal Institute of Chartered Surveyors, the Ratings Surveyors Association, the VOA or through another professional advisor including your accountant. Businesses who want to challenge their rating themselves can contact the
local VOA to state why they consider the valuation to be incorrect. It can also be done online at www.voa.gov.uk. The VOA will acknowledge the appeal within ten working days and check if it’s valid. If it is, they may visit the property. If it is a material change, say, alterations have been made to the property or the use of the property has changed, a visit may not be required.
There are various other ways to seek to lower liability. There have been instances of businesses shutting off floors of their premises to reduce their bill significantly; if part of the building is empty and not being used, it can qualify for rate relief. Likewise, an empty property is exempt from paying rates for three months after it becomes vacant. If the premises are an industrial/warehouse building, it would gain a further three months relief.
If the building only has a rateable value of up to £12,000, 100 percent relief is available in 2012/13 and up to 50 percent in the subsequent years. Those with a rateable value from £12,000 to £17,999 can make use of SBRR mentioned previously. Businesses that relocate to one of the new Enterprise Zones can take advantage of a 100 percent relief to their ratings bill for five years. There are 21 Enterprise Zones planned, with projects announced in Cheshire, Essex, Cornwall, Gosport, Hereford, Humber Estuary, Leeds, Sheffield, Birmingham, Bristol, Liverpool, London, Manchester, Derby, Nottingham, the Black Country, the Tees Valley, the West of England and the North East. Rural businesses will also be eligible for relief, aimed at encouraging small businesses to remain open in more remote areas.
Time to pay
Businesses that are experiencing particular hardship should contact their local authority. They have the power to provide rate relief for struggling companies.
The government’s Business Rates Deferral Scheme helps businesses spread the increase in the current financial year’s bill across three years; it enables companies to reserve paying 3.2 percent of the current year’s bill or 60 percent of the retail price index rise until 2013/14 and 2014/15.
Road improvements, road closures and upgrades to transport infrastructure can sometimes be disruptive and restrict access for deliveries and customers. Under current law, there is no compensation available for loss of trade. But, for disruption over a sustained period, it may be possible to apply for a temporary reduction in the business rate, because the highway works may have affected the rental value of the premises over that period.
If a business is affected by local disruption, they can also contact their VOA directly to lodge an appeal to have the rateable value of the property temporarily reduced for the period of the works.